Accounting · Consolidated Financial Statements
Alpha Co has a forward contract or written put option obligation to acquire the Non-Controlling Interest (NCI) in a subsidiary. The present value of the redemption amount is 100,000,000. How should this written put option obligation be initially treated in the consolidated financial statements on 1 January 20X5 under the preferred accounting method?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1As a component of equity (NCI), with the guaranteed future payment disclosed exclusively in the notes.
- 2As a financial liability measured at the present value of the redemption amount, with the corresponding debit reducing parent equity or NCI depending on the accounting policy.✓
- 3As a current liability, with a corresponding debit entry recognised inside profit or loss.
- 4As a non-current liability, resulting in goodwill calculated using the full fair value method.
Correct answer
As a financial liability measured at the present value of the redemption amount, with the corresponding debit reducing parent equity or NCI depending on the accounting policy.
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