A negative acquisition differential:
A) is always equal to negative goodwill.
B) occurs when the fair value of the subsidiary's net assets are less than their carrying amounts.
C) implies that the parent company may have overpaid for its acquisition.
D) cannot occur under the acquisition method.

Question

Quizplus · Accepted Answer

A negative acquisition differential occurs when the fair value of the subsidiary's net assets is less than their carrying amounts. This indicates that the parent company may have overpaid for the acquisition. However, it is not always equal to negative goodwill and it is possible under the acquisition method.

A Negative Acquisition Differential