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Why do you add the fair value of the non-controlling interest (the subsidiary shareholders) to the fair value of the consideration paid (less fair value of net assets) in the calculation of goodwill?
does it have something to do with the fact that since the parent company didn’t acquire 100% of the subsidiary shares, that a portion of it is still owned by the non-controlling interests?
but why would you have to add that to goodwill calculation which is the difference between what we pay and the net book value (cost at acquisition) of the net assets of the subsidiary?
The goodwill is the difference between the total value of all the shares in the subsidiary and the total book value of the subsidiary.
The total value of the subsidiary is the amount being paid by the parent company for the shares they bought plus the fair value of the other shares held by the NCI.
This is all explained in my free lectures.
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