After the Introduction of the Entity Method in Canada, Many

question 41

Essay

After the introduction of the entity method in Canada, many companies opted to value the non-controlling interest in subsidiaries based on the fair value of the subsidiary's identifiable net assets at the acquisition date instead of valuing the non-controlling interest at its fair value. That is, they opted to use the parent company extension approach rather than the entity method when preparing consolidated financial statements. What motivation might preparers of consolidated financial statements have that would cause them to have this preference?

---

Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs, highlighting the trade-offs in production choices.

Fully Employed

A situation in which all available labor resources are being used in the most economically efficient way.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods, given a set of inputs and technology, assuming efficient use of resources.