In 2006, CKX, Inc., a New York sports entertainment company, paid \($50\) million for an 80 percent ownership interest in G.O.A.T. LLC. (G.O.A.T. stands for “Greatest of All Time” and is a business that licenses the name and image of former boxing champion Muhammad Ali.) The remaining 20 percent of G.O.A.T. LLC is owned by the Ali Trust. At the time of acquisition, financial statements reveal that the gross revenue of G.O.A.T. averages \($5\) million annually, giving the LLC an estimated fair market value of \($30\) million. Discuss how CKX’s investment in G.O.A.T. LLC should be accounted for.
How should the Ali Trust account for its 20 percent ownership interest in G.O.A.T.?