Question 1

Another term for the noncontrolling interest is the ____________________________.

Accepted Answer

minority interest

Question 2

A manner of consolidation in which the noncontrolling interest is not presented in the consolidated statements is called _________________________________.

Accepted Answer

proportional consolidation

Question 3

Under current GAAP, ________________________________________ consolidation is required.

Accepted Answer

full

Question 4

A concept of viewing the noncontrolling interest that assumes that a new reporting entity does not result from the consolidation process is the ______________________________________concept.

Accepted Answer

The answer of A concept of viewing the noncontrolling interest...

Question 5

A concept of viewing the noncontrolling interest that assumes that a new reporting entity results from the consolidation process is the _________________________ concept.

Accepted Answer

The answer of A concept of viewing the noncontrolling interest...

Question 6

Dividends paid to noncontrolling shareholders are treated as a(n) _______________ __________________ of the noncontrolling interest from a consolidated perspective.

Accepted Answer

The answer of Dividends paid to noncontrolling shareholders are treated...

Question 7

The three allowable methods of valuing an investment in an unconsolidated subsidiary are the _________________________ method, the _________________________ method, and the __________________________ method.

Accepted Answer

The answer of The three allowable methods of valuing an...

Question 8

The fair value method of valuing an investment in an unconsolidated subsidiary can be used only if the subsidiary is _________________________________.

Accepted Answer

The answer of The fair value method of valuing an...

Question 9

The fair value method of valuing an investment in an unconsolidated partially owned subsidiary can be used only if the subsidiary's common stock has a _______________________________________ fair value.

Accepted Answer

The answer of The fair value method of valuing an...

Question 10

Controlling an entity by means of a voting majority interest is referred to as having ________________________________________ control.

Accepted Answer

The answer of Controlling an entity by means of a...

Question 11

Controlling an entity by means other than a voting majority interest is referred to as having ________________________________________ control.

Accepted Answer

The answer of Controlling an entity by means other than...

Question 12

An entity that is subject to consolidation pursuant to FASB FIN 46 is called a __________________________________ .

Accepted Answer

The answer of An entity that is subject to consolidation...

Question 13

The company that must consolidate a variable interest entity is called the __________________________________ .

Accepted Answer

The answer of The company that must consolidate a variable...

Question 14

An entity that is created to serve a specific, predetermined, limited purpose by a sponsoring entity is usually referred to, in practice, as a ____________________________ .

Accepted Answer

The answer of An entity that is created to serve...

Question 15

FIN 46 allows an exception to consolidation for _____________________________ .

Accepted Answer

The answer of FIN 46 allows an exception to consolidation...

Question 16

Events that cause a reassessment of determining the primary beneficiary are called _______________________________ .

Accepted Answer

The answer of Events that cause a reassessment of determining...

Question 17

Proportional consolidation is not allowed under current GAAP.

Accepted Answer

Under current GAAP (Generally Accepted Accounting Principles), proportional consolidation is not allowed; instead, entities must use the equity method or full consolidation, depending on the level of control or influence over the investee.

Question 18

Under proportional consolidation, no amounts are presented in the consolidated statements for the noncontrolling interest.

Accepted Answer

Under proportional consolidation, the parent company combines a portion of each of the financial line items of a subsidiary (proportional to its ownership interest) directly into its financial statements, without separately presenting any amounts for noncontrolling interests, as those interests are not reflected in this method.

Question 19

Both proportional consolidation and full consolidation are allowed under current GAAP.

Accepted Answer

Under current GAAP, only full consolidation is allowed; proportional consolidation is not permitted except in rare cases, such as joint ventures under certain conditions.

Question 20

For partially owned subsidiaries, part of the rationale of full consolidation is that the parent has a separable percentage interest in each individual asset, liability, and income statement account of the subsidiary.

Accepted Answer

The rationale for full consolidation is that the parent company exercises control over the subsidiary, allowing it to direct its activities, rather than having a separable percentage interest in each account of the subsidiary.

Quiz 3: Partially Owned Created Subsidiaries & Variable Interest Entities