Question 1

Parent Co acquires 80% of Sub Co for $800,000 cash. The fair value of Sub Co's identifiable net assets is $900,000. The fair value of the 20% non-controlling interest (NCI) is $180,000. What amount of Goodwill should be reported in the consolidated balance sheet?

Accepted Answer

Full Goodwill Method (US GAAP): (Fair Value of Consideration + Fair Value of NCI) - Fair Value of Net Assets.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Calculating partial goodwill (IFRS method) or forgetting NCI.

Parent Co acquires 80% of Sub Co for $800,000 cash. The fair value of Sub Co's identifiable net assets is $900,000. The fair value of the 20% non-controlling interest (NCI) is $180,000. What amount of Goodwill should be reported in the consolidated balance sheet?

How to approach this question

Full Answer

Common mistakes

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