Question

A parent acquires 80% of the stock of its subsidiary. Following U.S. GAAP, on the consolidated balance sheet less than 20% of the total goodwill will likely be allocated to the noncontrolling interest because:_________-

Answer 1

Under US GAAP, less than 20% of the total goodwill will likely be allocated to the noncontrolling interest on the consolidated balance sheet.

Step-by-step explanation:

When a parent acquires 80% of the stock of its subsidiary, US GAAP (Generally Accepted Accounting Principles) requires the preparation of consolidated financial statements. Goodwill is an intangible asset that represents the excess of the purchase price over the fair value of the subsidiary's net assets. Under US GAAP, less than 20% of the total goodwill will likely be allocated to the noncontrolling interest on the consolidated balance sheet.