LN -Outside Ownership (Ch 4)

LN -Outside Ownership (Ch 4) - Ch 4: Outside Ownership ACCT...

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Ch 4: Outside Ownership ACCT 501, SP 12 1 Part I: Acquisition involving a noncontrolling interest 1. Noncontrolling interest 1) If the parent doesn’t own 100% of the company, WHO owns the rest of it? Noncontrolling (Minority) Shareholder: other investors who hold ______________ the subsidiary’s stock. 2) The Parent ______________ and is responsible for ______________ the Subsidiary’s assets and liabilities, so we will still consolidate ________ of the Subsidiary’s financial information. 2. Reasons for Less-Than-100% Acquisitions 3. Measuring Fair Value of Noncontrolling Interests 1) Based on ____________________ of a publicly-traded company for shares not held by the acquirer, if available Reflects transactions among noncontrolling shareholders 2) Based on fair value of considerations parent paid for the acquisition, if other shares are not actively traded 3) Business valuation methods
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Ch 4: Outside Ownership ACCT 501, SP 12 2 4. Recording the Noncontrolling Shareholders in the consolidated financial statements. Noncontrolling interest appears as a separate line in the __________ section of the consolidated balance sheet, and Noncontrolling interest’s _____________________________ appears as a separate line on the income statement 5. Disclosure of Initial Valuation of Noncontrolling Interest 1) Must disclose in year of acquisition per SFAS 141(R) 2) Information to disclose ___________________ of the noncontrolling interest in the acquiree at acquisition date Valuation technique(s) and significant inputs used to measure the fair value of the noncontrolling interest 6. Example 1: Noncontrolling Interest Assume that PJ Corporation acquired 90% of Slipper Company’s 10,000 shares of outstanding stock. At acquisition date, PJ assessed the total fair market value of Slipper’s net identifiable assets (NIAs) at $500,000. Although Slipper’s stock had been trading for $50 per share, PJ had to pay $60 per share to induce enough stockholders to sell. Required: 1) What is the fair value of the noncontrolling interest in Slipper? 2) What is the total acquisition-date fair value of Slipper Company? 3) Is there any acquired goodwill?
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Ch 4: Outside Ownership ACCT 501, SP 12 3 Part II: Consolidation involving a noncontrolling interest 1. Parent’s Acquisition cost includes Fair value of shares and debt issued Net of registration and issue costs Cash paid directly to the former shareholders of the acquired subsidiary Any expected conditional payments 2. Valuation of Noncontrolling Interests and Goodwill at Acquisition Noncontrolling interests reported at fair value Revaluations of acquired identifiable net assets Acquired goodwill are first allocated to the controlling interests and then the remaining goodwill to the noncontrolling interests Goodwill allocated may not always be in proportion to ownership interests 3. Example 2 (in millions): Pants pays $42.6 cash for 80% of the stock of Socks on January 1, 2010. Socks' book value
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This note was uploaded on 02/22/2012 for the course ACCT 501 taught by Professor Ma during the Spring '11 term at South Carolina.

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LN -Outside Ownership (Ch 4) - Ch 4: Outside Ownership ACCT...

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