In rare cases the cost of purchasing a business combination may be less than the sum of the fair values of the identifiable assets and liabilities acquired bargain purchase).The true statement concerning the requirements of IFRS 3/AASB 3 in this situation is:

Question

Quizplus · Accepted Answer

According to IFRS 3/AASB 3, if the cost of the business combination is less than the sum of the fair values of the identifiable assets and liabilities acquired (bargain purchase), a genuine bargain purchase should be recognised immediately as a gain that is an addition to profit. Therefore, option C is the correct answer. Option A is incorrect because the buyer and the seller do not have to adjust the value to the consideration to eliminate the bargain purchase. Option B is incorrect because adjusting the values of the assets acquired is not the correct way to eliminate a bargain purchase. Option D is incorrect because recognizing a bargain purchase progressively over a 20-year period is not in line with IFRS 3/AASB 3.

In Rare Cases the Cost of Purchasing a Business Combination