If a gain on bargain purchase arises on a business combination, the non-controlling interest:
A) receives no share of the gain.
B) is allocated 100% of the gain.
C) is entitled to a proportionate share of the gain based on its level of share ownership.
D) receives a proportionate share of the gain after adjustments for tax effects have been made.

Question

Quizplus · Accepted Answer

According to the accounting standards, a gain on bargain purchase arises when a business combination is achieved at a price less than the fair value of the identifiable net assets acquired. In this case, the non-controlling interest does not participate in the gain on bargain purchase because it belongs to the acquirer and represents the excess of the fair value of the net assets acquired over the purchase price. Therefore, choice A is correct. The non-controlling interest will receive its share of the net assets acquired based on its level of share ownership, but it will not be entitled to share in the gain on bargain purchase.

If a Gain on Bargain Purchase Arises on a Business