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?

Calculate the controlling interest share of net income in a business combination.

Analyze the effects of bond transactions within a consolidated group on the consolidated financial statements.

Identify the characteristics of variable interest entities (VIEs) and understand the consolidation requirements.

Compute and recognize consolidation entries for intra-entity bond transactions.

---

Definitions:

Direct Labor-hours

The total number of hours worked by employees directly involved in the production of goods or services.

Variable Overhead Rate Variance

It is the difference between the actual variable overhead based on costs like utilities or materials and the standard cost that was expected.

Budgeted Production

Budgeted production refers to the anticipated quantity of products a company plans to produce in a specified period, based on forecasting.

Standard Cost System

A managerial accounting method where estimated costs are used for cost control and decision making.