BU487 Chapter 4: Chapter 4 – Consolidation of Non-Wholly Owned Subsidiaries
Chapter 4 – Consolidation of Non-Wholly Owned Subsidiaries
Non-controlling interest (NCI) – represents additional set of owners who have legal claim to the
subsidiary’s net asset since you only bought a portion,
Four Theories on how to report
Proprietary Theory
Focus: the standpoint of the shareholders of the parent company
BV or FV: fair values of the parent’s portion of subsidiary’s identifiable net assets
Goodwill: parent’s portion of the full fair value of good will
NCI: No reflection
NOTES
oYou would multiple everything by the % you acquired or owned, you would not combine
everything together, just the % you owned, even for goodwill
Parent Company Theory
Focus: Both the controlling and non-controlling shareholders
BV or FV: full fair values of subsidiary’s identifiable net assets as if the parent had acquired 100%
Goodwill: Full fair value of goodwill as if the parent had acquired 100%
NCI: Reflected at the fair value based on the implied value, and reported as an equity
Parent Company Extension Theory – you only reflect on what you own
Focus: Both controlling and non-controlling shareholders
BV or FV: full fair values of subsidiary’s identifiable net assets as if the parent had acquired 100%
Goodwill: Parent’s portion of the full fair value of goodwill
oTotal goodwill * % acquired or owned
NCI: reflected at the fair value of the sub’s identifiable assets, and reported as an equity
oTotal NCI = implied value * % not acquired
oNCI under parent company extension = Total NCI * % acquired
NOTES
oYou would reflect NCI and Goodwill as the % you acquired/owned
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 4 consolidation of non-wholly owned subsidiaries. Non-controlling interest (nci) represents additional set of owners who have legal claim to the subsidiary"s net asset since you only bought a portion, Focus: the standpoint of the shareholders of the parent company. Bv or fv: fair values of the parent"s portion of subsidiary"s identifiable net assets. Goodwill: parent"s portion of the full fair value of good will. Notes: you would multiple everything by the % you acquired or owned, you would not combine everything together, just the % you owned, even for goodwill. Goodwill: full fair value of goodwill as if the parent had acquired 100% Nci: reflected at the fair value based on the implied value, and reported as an equity. Parent company extension theory you only reflect on what you own. Bv or fv: full fair values of subsidiary"s identifiable net assets as if the parent had acquired 100%
