An Important Issue That Must Be Considered When Valuing a Business

question 23

True/False

An important issue that must be considered when valuing a business is whether a controlling ownership interest or a minority interest is being valued.

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Definitions:

Significant Influence

Control exerted by an investor over a subsidiary or associate, typically through ownership of a substantial portion of voting stock, allowing the investor to affect financial and operating policies.

Equity Method

An accounting technique used by a company to record investments in other companies where it has significant influence but does not have full control.

Consolidated Financial Statements

Financial statements that combine the financial information of a parent company with its subsidiaries to present a single set of statements for the entire group.

FVTPL

Fair Value Through Profit or Loss, an accounting strategy whereby financial assets are valued at their current market price, with changes in fair value recorded in the profit or loss statement.