The FASB received numerous comment letters during its deliberations prior to adopting the current financial accounting standards on business combinations. Many of these letters addressed the FASBs proposed (and ultimately accepted) use of the economic unit concept as a valuation basis for less-than-100-percent acquisitions. A sampling of these letters includes the following observations:

Bob Laux, Microsoft: Microsoft agrees with the Board that the principles underlying standards should strive to reflect the underlying economics of transactions and events. However, we do not believe the Boards conclusion that recognizing the entire economic value of the acquiree, regardless of the ownership interest in the acquiree at the acquisition date, reflects the underlying economics.

Patricia A. Little, Ford Motor Company: We agree that recognizing 100 percent of the fair value of the acquiree is appropriate. We believe that this is crucial in erasing anomalies which were created when only the incremental ownership acquired was fair valued and the minority interest was reflected at its carryover basis.

Sharilyn Gasaway, Alltel Corporation: One of the underlying principles is that the acquirer should measure and recognize the fair value of the acquiree as a whole. If 100 percent of the ownership interests are acquired, measuring and recognizing 100 percent of the fair value is both appropriate and informative. However, if less than 100 percent of the ownership interests are acquired, recognizing the fair value of 100 percent of the business acquired is not representative of the value actually acquired. In the instance in which certain minority owners retain their ownership interest, recognizing the fair value of the minority interest does not provide sufficient benefit to financial statement users to justify the additional cost incurred to calculate that fair value.

PricewaterhouseCoopers: We agree that the noncontrolling interest should be recorded at its fair value when it is initially recorded in the consolidated financial statements. As such, when control is obtained in a single step, the acquirer would record 100 percent of the fair value of the assets acquired (including goodwill) and liabilities assumed.

Loretta Cangialosi, Pfizer: While we understand the motivation of the FASB to account for all elements of the acquisition transaction at fair value, we are deeply concerned about the practice issues that will result. The heavy reliance on expected value techniques, use of the hypothetical market participants, the lack of observable markets, and the obligation to affix values to possible and even remote scenarios, among other requirements, will all conspire to create a standard that will likely prove to be nonoperational, unauditable, representationally unfaithful, abuse-prone, costly, and of limited (and perhaps negative) shareholder value.

Do you think the FASB made the correct decision in requiring consolidated financial statements to recognize all of the subsidiarys assets and liabilities at fair value regardless of the percentage ownership acquired by the parent?