Chapter 1 Research Case Paper – Noncontrolling Shareholder Rights
Students will prepare a three-to-four-page paper that responds to the questions in the Chapter 1 Research Case about Noncontrolling Shareholder Rights on page 38.
RESEARCH CASE NONCONTROLLING SHAREHOLDER
Consolidated financial reporting is appropriate when one t entity has a controlling financial interest in another entity. The usual condition for a controlling financial interest is ownership of a majority voting interest. But in some circumstances, control does not rest with the majority owner—especially when noncontrolling owners are contractually provided with approval or veto rights that can restrict the actions of the majority owner. In these cases, the majority owner employs the equity method rather than consolidation.
Address the following by searching the FASB ASC Topic 810 on consolidation.
- What are protective noncontrolling rights?
- What are substantive participating noncontrolling rights?
- What noncontrolling rights overcome the presumption that all majority-owned investees should be consolidated?
- Zee Company buys 60 percent of the voting stock of Bee Company with the remaining 40 percent noncontrolling interest held by Bee’s former owners, who negotiated the following noncontrolling rights.
Any new debt above $ 1,000,000 must be approved by the 40 percent noncontrolling shareholders. Any dividends or other cash distributions to owners in excess of customary historical amounts must be approved by the 40 percent noncontrolling shareholders.
According to the FASB ASC, what are the issues in determining whether Zee should consolidate Bee or report its investment in Bee under the equity method?
Please use the FASB ASC to research your responses to the case questions. Students were provided with access to the FASB ASC “Professional View” using a login and password posted in Course Information. Please ensure that your responses to the questions include original exposition and interpretation of your research, and are not simply a series of citations that were “cut and pasted” from the FASB ASC website.
Please ensure that your paper conforms to APA standards and includes at least three citations. Remember to cite all sources used, including your textbook and the FASB ASC website. Please include a cover page, and an introduction paragraph, several analyses paragraphs, a conclusion paragraph, and a references page.
- You may access the FASC Codification database for your research paper using the following login information: