Cost of Control:

The cost of control refers to the expenses incurred by a company to maintain its control over a subsidiary or an acquired business. It includes various costs associated with acquiring and managing the subsidiary, such as goodwill and capital reserve. Let's explore these concepts in detail:

1) Goodwill:
Goodwill is an intangible asset that arises when a company acquires another business for a price higher than the fair value of its identifiable net assets. It represents the reputation, customer relationships, brand value, and other non-physical assets of the acquired business. Goodwill is recorded as an asset on the balance sheet and is subject to annual impairment testing.

When a company acquires a subsidiary, it often pays a premium to gain control over the subsidiary's operations and assets. This premium is considered goodwill and represents the future economic benefits expected to arise from the subsidiary's operations. The cost of control includes the initial premium paid for acquiring goodwill and any subsequent impairment charges if the value of goodwill decreases over time.

2) Capital Reserve:
Capital reserve is a part of shareholders' equity that arises from non-operating activities. It includes funds set aside from profit or capital surplus for specific purposes, such as acquiring subsidiaries or expanding the company's operations. Capital reserve can be used to cover the costs associated with gaining control over a subsidiary.

3) Goodwill or Capital Reserve:
The cost of control can include either goodwill or capital reserve, or both, depending on the circumstances of the acquisition. If the company pays a premium to acquire a subsidiary, it will record goodwill as part of the cost of control. However, if the company uses its own internal funds or surplus capital to acquire the subsidiary, it may not record goodwill but instead utilize capital reserve to cover the acquisition costs.

4) None of these:
None of the above options are entirely correct as the cost of control can include either goodwill or capital reserve, or both, depending on the specific circumstances of the acquisition. The cost of control is a comprehensive term that encompasses various expenses associated with gaining and maintaining control over a subsidiary or acquired business.

In conclusion, the cost of control includes various expenses related to acquiring and managing a subsidiary, such as goodwill and capital reserve. The specific components of the cost of control depend on the nature of the acquisition and the financing methods used by the acquiring company.