Parental Company and Sub Company were combined in an acquisition transaction. Parental was able to acquire Sub at a bargain price. The sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Parental. After eliminating previously recorded goodwill, there was still some "negative goodwill." Proper accounting treatment by Parental is to report the amount as:

Question

Quizplus · Accepted Answer

When the purchase price of an acquisition is less than the fair value of the net assets acquired, the difference is recognized as an ordinary gain. This situation is often referred to as "negative goodwill."

Parental Company and Sub Company Were Combined in an Acquisition