When a Parent Company Acquires a Less-Than-100 Percent Controlling Interest

question 33

Essay

When a parent company acquires a less-than-100 percent controlling interest in another firm, the acquisition method requires a determination of the acquisition-date fair value of the acquired firm for consolidated financial reporting. How can the fair value of the noncontrolling interest be determined?

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Definitions:

Cost Driver

A factor that causes the cost of an activity or process to change, used in activity-based costing to allocate costs.

Dual Rate

A cost allocation method that separates costs into fixed and variable elements, applying different rates for each in costing calculations.

Single Rate

A method used in cost accounting where a single overhead rate is applied to all units produced, regardless of the department in which they were produced or the resources they consumed.

Fixed Costs

Fixed expenditures that are unaffected by production or sales volumes, encompassing rent, salaries, and insurance.