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Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik
Edition 10ISBN: 978-1260575910Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik
Edition 10ISBN: 978-1260575910 Exercise 1
Consolidated financial reporting is appropriate when one entity has a controlling financial interest in another entity.The usual condition for a controlling financial interest is ownership of a majority voting interest.But in some circumstances, control does not rest with the majority owner-especially, when noncontrolling owners are contractually provided with approval or veto rights that can restrict the actions of the majority owner.In these cases, the majority owner employs the equity method rather than consolidation.
Required
Address the following by searching the FASB ASC Topic 810 on consolidation.
1.What are protective noncontrolling rights
2.What are substantive participating noncontrolling rights
3.What noncontrolling rights overcome the presumption that all majority-owned investees should be consolidated
4.Zee Company buys 60 percent of the voting stock of Bee Company with the remaining 40 percent noncontrolling interest held by Bee's former owners, who negotiated the following noncontrolling rights:
• Any new debt above $1,000,000 must be approved by the 40 percent noncontrolling shareholders.
• Any dividends or other cash distributions to owners in excess of customary historical amounts must be approved by the 40 percent noncontrolling shareholders.
According to the FASB ASC, what are the issues in determining whether Zee should consolidate Bee or report its investment in Bee under the equity method
Required
Address the following by searching the FASB ASC Topic 810 on consolidation.
1.What are protective noncontrolling rights
2.What are substantive participating noncontrolling rights
3.What noncontrolling rights overcome the presumption that all majority-owned investees should be consolidated
4.Zee Company buys 60 percent of the voting stock of Bee Company with the remaining 40 percent noncontrolling interest held by Bee's former owners, who negotiated the following noncontrolling rights:
• Any new debt above $1,000,000 must be approved by the 40 percent noncontrolling shareholders.
• Any dividends or other cash distributions to owners in excess of customary historical amounts must be approved by the 40 percent noncontrolling shareholders.
According to the FASB ASC, what are the issues in determining whether Zee should consolidate Bee or report its investment in Bee under the equity method
Explanation
Verified
Verified
FASB:
FASB is an abbreviation of Financial Accounting Standards Boards.It is considered as an independent non-profit board that is responsible for providing the accounting standards for non-profit organization and companies.
1)
Explain protective minority rights:
Minority rights permit the minority shareholders to block the particular actions that are referred as protective rights and should not over-rule the consolidation.
• The amendments of articles of investee's incorporation.
• Pricing the transaction between the owner and the investee
• The liquidation of investee or decision finalized by the investee for bankruptcy.
• Purchase and disposition of assets that are greater than 20% on fair value of total assets.
• The re-purchase and issuance of equity interest should be blocked.
FASB is an abbreviation of Financial Accounting Standards Boards.It is considered as an independent non-profit board that is responsible for providing the accounting standards for non-profit organization and companies.
1)
Explain protective minority rights:
Minority rights permit the minority shareholders to block the particular actions that are referred as protective rights and should not over-rule the consolidation.
• The amendments of articles of investee's incorporation.
• Pricing the transaction between the owner and the investee
• The liquidation of investee or decision finalized by the investee for bankruptcy.
• Purchase and disposition of assets that are greater than 20% on fair value of total assets.
• The re-purchase and issuance of equity interest should be blocked.
Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik
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