If a business combination occurs and the consideration paid exceeds the fair value of the identifiable net assets of the subsidiary on the acquisition date and the parent acquires less than 100% of the outstanding common shares of the subsidiary, which consolidation method will result in the highest value for non-controlling interest on the acquisition date?
A) Proportionate consolidation method
B) Parent company method
C) Fair value enterprise method
D) Identifiable net assets method

Question

Quizplus · Accepted Answer

The fair value enterprise method leads to the highest value of non-controlling interest on the acquisition date since it assigns a fair value to the entire acquired enterprise rather than just focusing on the identifiable net assets. This results in a higher value for the subsidiary's equity, which means that the proportionate share of the non-controlling interest will also be higher than under the other consolidation methods.

If a Business Combination Occurs and the Consideration Paid Exceeds