Question

Which of the following statements, if any, concerning a noncontrolling interest in an acquiree is/are correct?

I. The value assigned to a noncontrolling interest in an acquiree should be based on the proportional share of that interest in the net assets of the acquiree.
II. The fair value per share of the noncontrolling interest in an acquiree must be the same as the fair value per share of the controlling (acquirer) interest.
A. Both I and II.
B. I only.
C. II only.
D. Neither I nor II

Answer 1

The value assigned to a noncontrolling interest in an acquiree should be based on the proportional share of that interest in the net assets of the acquiree. The fair value per share of the noncontrolling interest in an acquiree may not be the same as the fair value per share of the controlling interest.

Step-by-step explanation:

Statement I: The value assigned to a noncontrolling interest in an acquiree should be based on the proportional share of that interest in the net assets of the acquiree.

This statement is correct. When calculating the value of a noncontrolling interest, it should be based on the proportionate ownership of the net assets of the acquiree. This means that the noncontrolling interest should be valued based on its share of the acquiree's assets and liabilities.

Statement II: The fair value per share of the noncontrolling interest in an acquiree must be the same as the fair value per share of the controlling (acquirer) interest.

This statement is incorrect. The fair value per share of the noncontrolling interest may not be the same as the fair value per share of the controlling interest. The fair value per share is determined based on market conditions and other factors, and it can vary for the noncontrolling and controlling interests.

Therefore, the correct answer is option B - Statement I only.