Entity A acquired 60% of the ordinary shares of Business B on the 1st January 20x6. At acquisition, the book value of the subsidiary’s net assets was R400 000. The following information also relates to the subsidiary’s net assets: The fair value of PPE is found to be R100 000 higher than its book value; the fair value of inventory is 80% of the existing book value of R50 000; B discloses a contingent liability with a fair value considered to be R40 000; The non-controlling interest (NCI) was valued using the proportionate share of net assets method at acquisition. Based on this information, calculate the value of the NCI at the date of acquisition. Select one: a. R180 000 b. R160 000 c. R170 000 d. R150 000
Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.
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Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
