How is negative goodwill treated under the acquisition method?
A) The acquiring company will report a gain on acquisition.
B) The acquiring company will report a loss on acquisition.
C) The negative goodwill will be included in other comprehensive income, as it is essentially an unrealized gain.
D) The negative goodwill is prorated and allocated to the fair value of the identifiable net assets of the acquired company.

Question

Quizplus · Accepted Answer

Negative goodwill occurs when the fair value of the identifiable net assets acquired exceeds the purchase price. Therefore, the acquiring company will report a gain on acquisition. This gain is recognized as income in the income statement.

How Is Negative Goodwill Treated Under the Acquisition Method