Use either proportionate or FV NCI

NotesQuizCBE

NCI can be valued using the PROPORTIONATE method or the FAIR VALUE method

Proportionate method

Here NCI gets its % of S's NA

  1. % of S's NA (at fair value)

  2. No goodwill in S is given to NCI

Let's say the parent acquires 80% of a subsidiary with net assets of 100.

NCI would receive 20 at acquisition

The goodwill calculation would look like this...

FV of Consideration X
NCI 20
FV of Net Assets Acquired (100)
Goodwill X

Fair Value

Here NCI get their % of NA AND goodwill

  1. % of S's NA (at fair value)

  2. % of S's Goodwill

Let's say the parent acquires 80% of a subsidiary with net assets of 100.

NCI would receive the FV of its holding at acquisition

This would be given in the exam or calculated as NCI shares x share price

Let's say this is 28

The goodwill calculation would look like this...

FV of Consideration X
NCI 28
FV of Net Assets Acquired (100)
Goodwill X
NotesQuizCBE