If a parent company acquires wholly owned subsidiary at an amount greater than the book value, the excess should be

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When a parent company acquires a wholly owned subsidiary at an amount greater than the book value, the excess amount should be allocated to identifiable assets to the extent of their fair values. If there is any remaining excess amount, it should be allocated to goodwill. This is because the excess amount represents the premium paid by the parent company to acquire the subsidiary and this premium is expected to generate future economic benefits for the parent company. Therefore, it should be recognized as an asset called goodwill.

If a Parent Company Acquires Wholly Owned Subsidiary at an Amount