Bargain Purchases
When the Purchase Price Is Below Fair Value
A bargain purchase occurs when the fair value of identifiable net assets acquired exceeds the consideration transferred plus any noncontrolling interest. After confirming all measurements, the acquirer recognizes a gain in earnings.
- Reassess all fair value measurements.
- Confirm consideration transferred.
- Recognize gain only after verification.
Note
Bargain purchases are uncommon and require careful review before recognizing a gain.
Summary
A bargain purchase results in a gain when the acquisition price is less than the fair value of identifiable net assets.