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I am confused regarding calculation of NCI using the proportion of net assets method .
I want to know the difference between fair value method and proportion of net assets methods.
And if we calculate by proportion share of net assets method , we take net assets on acquisition or we take net assets on reporting date . There are so many ways of calculating the same thing that’s what is confusing me plz explain me clearly the possible ways of calculating the above.
And most imp. Is in any case do we use NA @ reporting date ?
Have you looked through the class notes and the videos on what you mention above?
The two methods refer to how we measure the NCI in the consolidated SFP. The fair value method takes the fair value of the shares in the subsidiary to value the NCI. So, if on acquisition the S shares were worth $2 each then we would use that figure to value the number of NCI shares.
The proportionate share of net assets method uses the values of the assets/liabilities in the subsidiary’s financial statements to value the NCI. This is where we would use the net assets at the reporting date.
my doubt is regarding proportionate method why are we taking net assets at reporting date , why not net assets at acquisition. and furthermore do we take post acq. profit share if we are taking net assets at reporting date
because when i was reading kaplan book i gone through the workings given in book there they mentioned under proportionate share of net assets method , they took net assets at acquisition. on pg-441
as per kaplan book workings .
under (W4) NCI
they mentioned whatever amount is taken in (W3) Goodwill as NCI value same should be taken .
please go through workings in kaplan book then you will understand my problem.