In measuring non-controlling interest at the date of acquisition, which of the following would not be indicative of the value attributed to the non-controlling interest?
A) Fair value based on stock trades of the acquired company.
B) Subsidiary cash flows discounted to present value.
C) Book value of subsidiary net assets.
D) Projections of residual income.
E) Consideration transferred by the parent company that implies a total subsidiary value.

Question

Quizplus · Accepted Answer

The book value of subsidiary net assets does not provide any indication of the value attributed to the non-controlling interest because it includes both the controlling and the non-controlling interest. The fair value based on stock trades of the acquired company, subsidiary cash flows discounted to present value, projections of residual income, and consideration transferred by the parent company that implies a total subsidiary value are all potential indicators of the value attributed to the non-controlling interest.

In Measuring Non-Controlling Interest at the Date of Acquisition, Which