Why does AASB 3 provide a choice in how to measure non-controlling interests?

Expert Solution

SOLUTION :

AASB or The Australian Accounting Standards Board develops, maintains and also issues certain accounting standards applicable under Australian Company Law.
AASB 3 standard relates to the information or disclosure in the financial statements by a company with respect to Business Combination.
This standard provides a choice to the acquirer to measure the non controlling interests in the acquiree with respect to the identified assets, during acquisition date at the fair value for each class of assets.
A choice in measuring the non controlling interest (either at fair value or proportionate share of acquiree net assets) is applicable only to showcase the ownership interests in the acquiree. This entitles the holders to a proportionate share of the entity's each class of net assets during the event of liquidation.
Sometimes, the acquirer considers the market value for the shares held by the acquirer, the absence of which will enable the acquirer to consider the fair value.

Generally, any other component of the non controlling interest is measured at the value of acquisition date.

ekkarill92 answered 2 years ago

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