Non controlling interest (NCI) is that part of the sub that the parent cannot control. In general, it is valued based on the common stock that the parent does not own times the market price for the shares on the date of the business combination.

Parent pays $108,000 for 90% interest. The remaining 10% (NCI) is valued at $12,000, which is market price times the number of shares on the business combination date. If we take this apart, we see that $108,000/.90=$120,000. So we have parent interest valued at $108,000 and NCI at $12,000. But, what if we changed the amount the parent paid to $100,000, then the total valuation of the company would be $100,000 + $12,000 not equal to $120,000.

So, my question for you is, if we are valuing the parents investment in the sub using amount paid, why are we valuing the NCI using stock price?

Does this seem the best way to do it.

Discuss this topic and as always, make a contribution to the discussion that is unique.

Need explanation