Question

FASB ASC 805, Business Combinations, provides principles for allocating the fair value of an acquired business. When the collective fair values of the separately identified assets acquired and liabilities assumed exceed the fair value of the consideration transferred, the difference should be:

Answer 1

Recognized as an ordinary gain from a bargain purchase.

Step-by-step explanation:

FASB ASC 806, Business Combinations, gives a description of the right accounting treatment an acquirer has to use in business combinations.

ASC 805:

• Applies to the combination of business with a date of acquisition that matches the start of the first annual or takes place after it.
• It provides a wider definition of a business.
• Demands the implementation of the acquisition method.
• Identifies assets obtained and accountabilities assumed at a fair value like it is stated in ASC 820: Fair Value Measurement.