Advanced Acctg Ch. 4
The combined credits to the noncontrolling interests in Consolidation Entries S and A equal the
total balance of the noncontrolling interest as of the beginning of the period.
Control premium
The extra price per share paid to ensure a controlling interest in a business combination.
Economic Unit concept
Under the acquisition method; calls for a parent to consolidate 100% of a controlled subsidiary's assets and liabilities despite owning less than 100% of the subsidiary's voting shares.
A consolidated balance sheet reports a noncontrolling interest as
a component of owners' equity.
A noncontrolling interest in a consolidated entity may be described as
an ownership interest in a subsidiary held by owners other than the parent company.
Because it is an intra-entity transfer, the portion of a subsidiary dividend payable to its parent company is
eliminated in consolidation.
The Consolidation Entry A adjustment to the subsidiary's assets and liabilities is net of
previous period's excess fair over book value amortizations.
The amount for the noncontrolling interest is reported in the consolidated balance sheet in the
shareholders' equity section.
The calculation of the ending balance of the noncontrolling interest:
- The balance of the noncontrolling interest as of the beginning of the period. - The consolidated entity's net income attributable to the non-controlling interest. - Dividends from the subsidiary attributable to the noncontrolling interest.
In periods subsequent to an acquisition, how is consolidated net income generally computed in the presence of a 20% noncontrolling interest?
100% of the parent's net income plus 100% of the subsidiary's net income adjusted for excess acquisition-date fair value amortizations.
When the parent company employs the initial value method for its Investment in Subsidiary account,
Entry D is unnecessary.
The ending balance of the noncontrolling interest reported in the stockholders' equity section of the consolidated balance sheet:
- Subsidiary dividends attributable to the noncontrolling interest - The noncontrolling interest beginning of the year balance - Net income attributable to the noncontrolling interest
When a business acquisition resulting in control takes place midyear, how is the consolidation process affected?
- only post-acquisition subsidiary revenues are included in consolidated totals. - Subsidiary book value must be computed as of the acquisition date. - Only post-acquisition subsidiary expenses are included in consolidated totals.
Reasons for one company to gain control over another with less than 100% ownership
- some outside owners of the subsidiary company may have been unwilling to sell their shares. - the parent firm may not have resources sufficient to acquire all of its subsidiary shares. - the laws of some countries prevent complete ownership by a foreign firm.
Under IFRS accounting standards, the initial accounting valuation for the noncontrolling interest may be measured utilizing
- the acquisition-date fair value. - the noncontrolling interest share of the subsidiary's net identifiable assets. - an amount that excludes goodwill for the noncontrolling interest.
Consolidation Entry A2 focuses on valuation and allocation of
Goodwill.
