Negative goodwill arises when
A) the book value of identifiable net assets acquired exceeds the purchase price.
B) the fair value of identifiable net assets acquired exceeds the purchase price.
C) the fair value of identifiable net assets acquired is less than the purchase price.
D) the fair value of identifiable net assets acquired exceeds the book value.

Question

Quizplus · Accepted Answer

Negative goodwill occurs when the purchase price of an acquisition is less than the fair value of its net assets. This means the buyer effectively pays less than the net market value of the assets acquired, leading to a gain on purchase.

Negative Goodwill Arises When