Terms in this set (8)
Why own less than 100% of a subsidiary?
-Reduces share dilution if share exchange
-Spreads ownership risk
-NCI can provide a market for the sub's shares
A non-controlling partner brings expertise.
The proprietary method
Views the consolidated group from the viewpoint of the owners of the parent. Goal is to report only the total interest owned by the shareholders of the parent.
Proportionate consolidation method(can NOT be used under IFRS and ASPE)
Views the consolidated group as a single economic entity and the goal of consolidation is to report all interests controlled by that entity.
Entity Method is an application of entity theory. (can be used under IFRS and ASPE)
Include the parent' share of FV of subsidiary's assets and liabilities plus the carrying value of NCI's share. Consolidated SCI would include 100% of subsidiary's revenues and expenses.
Parent-Company Extension method (purchased goodwill method)
Include 100% of FV of subsidiary's net identifiable assets and liabs, but only the parent's share of goodwill, and 100% of all revenues and expenses. On the SFP the NCI is valued at its proportionate share of the FV of the net identifiable assets of the subsidiary.
Entity Method (full goodwill method)
Include 100% of FV of subsidiary's assets and liabilities and goodwill and 100% of all revenues and expenses. On the SFP the NCI is valued at its proportionate share of the full FV of the subsidiary.
Proportionate Consolidation method
Include only the Parent's share of FV of the subsidiary's assets, liabilities, revenues and expenses.
The consolidated SCI would include only the parent's share of the subsidiary's revenues and expenses.
Conceptual alternatives for consolidating Non-Wholly owned subsidiaries
Proportionate consolidation method
Parent-Company Extension method
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