Exam 4: Consolidation of Non-Wholly Owned Subsidiaries

On that date, which of the following statements pertaining to Non-Controlling Interest is TRUE?

Which consolidation theory should be used in preparing consolidated financial statements in accordance with IFRS?

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. Assuming Parent purchased 80% of Sub Inc. for $180,000; the Assets section of Parent's Consolidated Balance Sheet on the date of acquisition (August 1, 2012) would total what amount under the Entity Method?

Under the Parent Company Theory, which of the following statements pertaining to Consolidated Financial Statements is TRUE?

In an inflationary economy, under which consolidation theory would total assets in the consolidated balance sheet at the acquisition date be greatest?

A business combination involves a contingent consideration. It is considered 70% probable that a payment of $500,000 will become payable three years after the acquisition date. Using a 7% discount rate, how much interest expense should be recorded on the liability for the first year after acquisition?

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. If Parent Company purchased 80% of Sub Inc. for $180,000, the Liabilities section of Parent's Consolidated Balance Sheet on the date of acquisition (August 1, 2012) would total what amount under GAAP after January 1, 2011?

IFRS permits several methods to be used to determine the fair value of the non-controlling interest in a subsidiary at the acquisition date. Which of the following is NOT an appropriate method to determine the fair value of the non-controlling interest (NCI)?

Contingent consideration should be valued at:

The focus of the Consolidated Financial Statements on the shareholders of the parent company is characteristic of:

When preparing the consolidated balance sheet on the date of acquisition, the parent's investment (in subsidiary company) is:

Non-Controlling Interest is presented in the Shareholders' Equity section of the Balance Sheet under:

Why might the fair value of the noncontrolling interest in a subsidiary on the date that it is acquired in a business combination not be proportionate to the price per share paid by the parent company to acquire control? How do the IFRS recognize this?

The Net Incomes for Parent and Sub Inc for the year ended July 31, 2012 were $120,000 and $60,000 respectively. Assuming that Parent Inc. purchased 80% of Sub's voting shares on the date of acquisition (August 1, 2012) for $180,000, what would be the amount of the Non-Controlling Interest on the date of acquisition if the Entity Method were used?

On the date of formation of a 100% owned subsidiary by the parent, which of the following statements pertaining to Consolidated Financial Statements is TRUE?

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?

After the introduction of the entity method in Canada, many companies opted to value the noncontrolling interest in subsidiaries based on the fair value of the subsidiary's identifiable net assets at the acquisition date instead of valuing the noncontrolling interest at its fair value. That is, they opted to use the parent company extension approach rather than the entity method when preparing consolidated financial statements. What motivation might preparers of consolidated financial statements have that would cause them to have this preference?

Which accounts on the consolidated balance sheet will be different when the entity method is used from when the parent company extension theory is used?

Discuss the disclosure requirements for long term investments including accounting policies and NCI.

Contingent consideration will be classified as a liability when: