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What Is an Externality? How Do Positive and Negative Externalities

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Essay

What is an externality? How do positive and negative externalities differ in their effects? How can government action correct positive and negative externalities?


Definitions:

Indirect NCI

An accounting term referring to the portion of equity in a subsidiary not directly attributable to the parent company, calculated on a proportional basis.

Ownership Interest

A stake or share in an asset or entity, giving the holder a claim to a portion of its equity or assets and possibly a share in its profits.

Limited

A form of corporate structure whereby the shareholders' liability is limited to the capital they have invested in the company.

Consolidation Adjustments

Adjustments made to combine the financial statements of parent and subsidiary companies into a single set of financial statements.

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