Reference no: EM132813316
The Majority Report Company purchased a controlling share (but not 100%) in the Duo Company. The consolidated balance sheet right after the purchase was as follows:
Assets other than goodwill $1,140,000
Goodwill $570,000
Total assets $1,710,000
Liabilities $720,000
Equity attributable to shareholders of the Majority Report Company $540,000
Non-controlling interests $450,000
Total Liabilities and equity $1,710,000
The company is using US GAAP, and therefore measured the non-controlling interests (NCI) at fair value ($450,000). The non-controlling interest proportionate share in the fair value of net identifiable assets is only $270,000.
Problem a. What is an additional accounting choice available only in IFRS for measuring NCI (other than using FV)?
Problem b. If the company was able to use this other method to measure NCI, what are the line items in the balance sheet that would have changed?
Problem c. For each of the methods allowed in IFRS, compute the leverage ratio (liabilities/Assets). Which method creates a riskier balance sheet?
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