Asked by Aparna Narayanan on Jun 21, 2024
Verified
Any negative goodwill arising on the date of acquisition:
A) is prorated among the parent company's identifiable net assets.
B) is recognized as a gain on the date of acquisition.
C) should be amortized over a predetermined period.
D) is recognized as a gain on date of acquisition by both the parent and the non-controlling interest.
Negative Goodwill
A situation that occurs when the purchase price of a company is less than the fair value of its net assets, often recognized as a gain in the acquirer's profit and loss account.
Identifiable Net Assets
Assets of an acquired company that can be assigned a fair value and are capable of being separated or divided from the entity for recognition during an acquisition.
- Learn about the approach to negative goodwill and acquisition variances in the preparation of consolidated financial statements.
Verified Answer
RC
Riley CabaneroJun 24, 2024
Final Answer :
B
Explanation :
Negative goodwill arises when the purchase price is less than the fair value of the acquired company's net assets. This is recognized as a gain on the date of acquisition by the parent company. It is not prorated among identifiable net assets or amortized over a predetermined period. It is not recognized by the non-controlling interest.
Learning Objectives
- Learn about the approach to negative goodwill and acquisition variances in the preparation of consolidated financial statements.