Partial Fair Value Method

Brief Definition

The partial 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.

Further Explanation

The partial 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. Unlike the full fair value method, this approach values only the controlling interest acquired by the parent company at fair value. The non-controlling interest is measured at its proportionate share of the subsidiary’s identifiable net assets, rather than at fair value.

Example:
If a parent company acquires 70% of a subsidiary and the identifiable net assets of the subsidiary are valued at $1 million, the non-controlling interest (30%) would be valued at $300,000 (30% of $1 million). The parent company would report the 70% interest acquired at fair value, but the non-controlling interest would be reported at $300,000.