In a business combination accounted for as an acquisition, how should the excess of fair value of identifiable net assets acquired over implied value be treated?
A) Amortized as a credit to income over a period not to exceed forty years.
B) Amortized as a charge to expense over a period not to exceed forty years.
C) Amortized directly to retained earnings over a period not to exceed forty years.
D) Recognized as an ordinary gain in the year of acquisition.

Question

Quizplus · Accepted Answer

When the fair value of identifiable net assets acquired exceeds the purchase price (implied value) in a business combination, the excess is recognized as an ordinary gain in the year of acquisition. This situation is often referred to as a "bargain purchase."

In a Business Combination Accounted for as an Acquisition, How