According to IFRS 3, how should companies account for negative goodwill arising from business combinations?
A)It should be capitalized and amortized over a period of no more than 40 years.
B)It should be treated as a loss on the consolidated income statement.
C)It should be recognized immediately as a gain in the income statement.
D)There is no rule for negative goodwill, because there is no such thing.

Question

Quizplus · Accepted Answer

According to IFRS 3, negative goodwill arising from business combinations should be recognized immediately as a gain in the income statement. It should not be deferred and amortized over a period of time or treated as a loss. Negative goodwill arises when the fair value of the net assets acquired exceeds the cost of the acquisition, often due to the market conditions or the distressed state of the target company. The recognition of negative goodwill as a gain reflects the excess value acquired by the purchaser in the transaction.

According to IFRS 3, How Should Companies Account for Negative