In a business combination accounted for as an acquisition, how should the excess of fair value of net assets acquired over the consideration paid 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) Recorded as an ordinary gain.

Question

Quizplus · Accepted Answer

When the fair value of net assets acquired in a business combination exceeds the consideration paid, the excess is recognized as an ordinary gain in the financial statements. This treatment reflects the immediate economic benefit realized from acquiring assets at less than their fair value. There is no amortization process involved for this excess amount.

In a Business Combination Accounted for as an Acquisition, How