Len Innsbruck is the accountant for Wallex Trucks. This entity has an 80% holding in the entity Tires R-Us. Len is concerned that the consolidated financial statements prepared under IFRS 10 may be misleading. He believes that the main users of the consolidated financial statements are the shareholders of Wallex Trucks. The key performance indicators are then the profit numbers relating to the interests of those shareholders. He therefore wants to prepare the consolidated financial statements showing the non-controlling interest in Tires-R-Us in a category other than equity in the statement of financial performance. He also wants the statement of changes in equity to show the profit numbers relating to the parent shareholders only.
Required
Discuss the differences that would arise in the consolidated financial statements if the non controlling interest were classified as debt rather than equity, and the reasons the standard setters have chosen the equity classification