Full Fair Value Method

Brief Definition

The full fair value method is an accounting approach used to measure the fair value of non-controlling interests (NCI) in a subsidiary at the acquisition date. Under this method, the entire subsidiary, including both the controlling interest (owned by the parent company) and the non-controlling interest, is valued at fair value.

Further Explanation

The full fair value method is an accounting approach used to measure the fair value of non-controlling interests (NCI) in a subsidiary at the acquisition date. Under this method, the entire subsidiary, including both the controlling interest (owned by the parent company) and the non-controlling interest, is valued at fair value. This approach ensures that the non-controlling interest is recognized at its fair value, rather than its proportionate share of the subsidiary’s net assets.

Example:
If a parent company acquires 80% of a subsidiary and the fair value of the subsidiary as a whole is $1 million, the fair value of the non-controlling interest (20%) would be $200,000. The parent company would report the subsidiary’s assets and liabilities at fair value in its consolidated financial statements, including the non-controlling interest at $200,000.