A company issues new stock with a fair value of $120,000 to acquire 85% of the stock of another company. The fair value of the noncontrolling interest at the date of acquisition is $19,000, and the book value of the acquired company is $15,000. The subsidiary's net assets are reported at amounts approximating fair value at the date of acquisition, except that its plant assets are overvalued by $25,000, its reported license agreements are undervalued by $30,000, and it has previously unreported identifiable intangible assets with a fair value of $50,000. At what amount is the noncontrolling interest valued at the date of acquisition, following the alternative method allowed by IFRS?

Question

Grant Gill

Business

16 March, 14:35

A company issues new stock with a fair value of $120,000 to acquire 85% of the stock of another company. The fair value of the noncontrolling interest at the date of acquisition is $19,000, and the book value of the acquired company is $15,000. The subsidiary's net assets are reported at amounts approximating fair value at the date of acquisition, except that its plant assets are overvalued by $25,000, its reported license agreements are undervalued by $30,000, and it has previously unreported identifiable intangible assets with a fair value of $50,000. At what amount is the noncontrolling interest valued at the date of acquisition, following the alternative method allowed by IFRS?

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Zoey Herman · Answer 1

The amount if non-controlling interest at the date of acquisition will be $10,500.

Explanation:

The non-controlling interest is an ownership interest in a company where shareholders hold less than 50% of outstanding shares. The amount of non-controlling interest for the company will be $10,500.

Book value of acquired company is $15,000.

Plant is overvalued by $25,000

License is undervalued by $30,000

Unreported identifiable intangible assets are $50,000

The non-controlling interest is 15% (100 - 85)

The amount of non-controlling interest will be $15,000 - $25,000 + $30,000 + $50,000 = $70,000

$70,000 * 15% = $10,500.