Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired, the difference must be recognised in the consolidation worksheet as:
A) a transfer to the business combination valuation reserve.
B) an increase in the 'Shares in subsidiary' asset.
C) a gain on bargain purchase.
D) goodwill.

Question

Quizplus · Accepted Answer

A gain on bargain purchase occurs when the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired. This gain is recognized in the consolidation worksheet as a separate item, and is not included in goodwill or any other account.

Where the Consideration Transferred Is Less Than the Fair Value