In considering its proposed statement of financial accountin

In considering its proposed statement of financial accountingstandards on business combinations, the FASB received numerous commentletters. Many of these letters addressed the FASB’s proposed adoption ofthe economic unit concept as a valuation basis forless-than-100-percent acquisitions. A sampling of these letters includesthe following observations: Bob Laux, Microsoft: Microsoft agrees with the Board that theprinciples underlying standards should strive to reflect the underlyingeconomics of transactions and events. However, we do not believe theBoard’s conclusion that recognizing the entire economic value of theacquiree, regardless of the ownership interest in the acquiree at theacquisition date, reflects the underlying economics.Patricia A. Little, Ford Motor Company: We agree that recognizing100 percent of the fair value of the acquiree is appropriate. We believethat this is crucial in erasing anomalies which were created when onlythe incremental ownership acquired was fair valued and the minorityinterest was reflected at its carryover basis.Sharilyn Gasaway, Alltel Corporation: One of the underlyingprinciples … is that the acquirer should measure and recognize the fairvalue of the acquiree as a whole. If 100 percent of the ownershipinterests are acquired, measuring and recognizing 100 percent of thefair value is both appropriate and informative. However, if less than100 percent of the ownership interests are acquired, recognizing thefair value of 100 percent of the business acquired is not representativeof the value actually acquired. In the instance in which certainminority owners retain their ownership interest, recognizing the fairvalue of the minority interest does not provide sufficient benefit tofinancial statement users to justify the additional cost incurred tocalculate that fair value.PricewaterhouseCoopers: We agree that the noncontrolling interestshould be recorded at its fair value when it is initially recorded inthe consolidated financial statements. As such, when control is obtainedin a single step, the acquirer would record 100 percent of the fairvalue of the assets acquired (including goodwill) and liabilitiesassumed.Loretta Cangialosi, Pfizer: While we understand the motivation ofthe FASB to account for all elements of the acquisition transaction atfair value, we are deeply concerned about the practice issues that willresult. The heavy reliance on expected value techniques, use of thehypothetical market participants, the lack of observable markets, andthe obligation to affix values to “possible” and even “remote”scenarios, among other requirements, will all conspire to create astandard that will likely prove to be nonoperational, unauditable,representationally unfaithful, abuse-prone, costly, and of limited (andperhaps negative) shareholder value.Do you think the FASB made the correct decision in requiringconsolidated financial statements to recognize all subsidiary’s assetsand liabilities at fair value regardless of the percentage ownershipacquired by the parent?