How is noncontrolling interest as of the acquisition date calculated under US GAAP?

The calculation of noncontrolling interest as of the acquisition date under US GAAP is determined by taking the fair value of the subsidiary and multiplying it by the percentage of the noncontrolling interest. This approach reflects the market value of the assets and liabilities of the subsidiary at the time of acquisition, providing a more accurate representation of the noncontrolling interest that exists in the subsidiary.

In practice, when a parent company acquires another company, it must assess not only the fair value of the controlling interest it has acquired but also the portion of the subsidiary that remains owned by other shareholders, which constitutes the noncontrolling interest. By using the fair value, the calculation accounts for the current market conditions and stakeholders' interests, ensuring that the financial statements accurately represent the economic realities of the acquisition.

This method aligns with the requirements under ASC 805, "Business Combinations," which stipulates that noncontrolling interest should be recognized at its fair value on the acquisition date. Other calculation options, such as book value, net income, or total assets, do not accurately represent the fair value of the noncontrolling interest and could misstate the amount recognized in the financial statements.