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Measuring goodwill and noncontrolling interest under the new consolidation accounting standards

James G.S. Yang (Montclair State University, Montclair, New Jersey, USA)
Frank J. Aquilino (Montclair State University, Montclair, New Jersey, USA)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Publication date: 3 July 2017

Abstract

Purpose

The accounting standards for consolidated financial statements have been updated recently. The change involves the measurement of goodwill and noncontrolling interest. Under the new accounting standards, goodwill consists of not only the parent company’s portion but also the noncontrolling interest’s share. The noncontrolling interest comprises both the subsidiary’s identifiable net assets and goodwill. In addition, it further changes the treatment of noncontrolling interest from liability to equity. The change indeed has far-reaching consequences on financial statements. This paper formulates an equation to measure goodwill and noncontrolling interest. It also provides some examples for illustrative purposes. The purpose of this paper is to update the financial reporting to the current standards.

Design/methodology/approach

New accounting standards under FASB #141R and 160.

Findings

New accounting standards in measuring goodwill and noncontrolling interest in financial reporting.

Research limitations/implications

The knowledge is useful for accountants and financial analysts.

Practical implications

Improve the quality of financial statements.

Social implications

Investors will be better informed.

Originality/value

This new accounting standard was not explored before.

Keywords

Citation

Yang, J.G.S. and Aquilino, F.J. (2017), "Measuring goodwill and noncontrolling interest under the new consolidation accounting standards", Journal of Financial Reporting and Accounting, Vol. 15 No. 2, pp. 198-207. https://doi.org/10.1108/JFRA-05-2015-0055

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited