One weakness associated with the Entity Theory is that:
A) it is inconsistent with the historical cost principle.
B) non-controlling interest (NCI) is computed using the fair market values of the subsidiary's net assets.
C) non-controlling interest (NCI) is computed using the book values of the subsidiary's net assets.
D)the presumed acquisition cost may be unrealistic when the parent purchases significantly less than 100% of the subsidiary's voting shares, or voting control is achieved incrementally.

Question

Quizplus · Accepted Answer

The weakness associated with the Entity Theory is that the presumed acquisition cost may be unrealistic when the parent purchases significantly less than 100% of the subsidiary's voting shares, or voting control is achieved incrementally. Therefore, the Entity Theory may overstate the parent's level of control over the subsidiary and may not accurately reflect the economic reality of the situation.

One Weakness Associated with the Entity Theory Is That