Question

On January 1, 2020 Herald acquires 100% of Tribune and will operate Tribune as a wholly owned subsidiary. Herald's purchase price was less than the fair value of the net assets of Tribune. How is this handled

Answer 1

When the purchase price is lower than the fair market value, accountants generally refer to this as negative goodwill. All negative goodwill must be reported as a gain.

Another way to refer to this type of situation is a bargain purchase (lower price than FMV).