Using the acquisition method, when a bargain purchase occurs and the net amount of the fair values of the separately identified assets acquired and liabilities exceed the fair value of the consideration transferred.
1. assets are recorded at amounts below their assessed fair values.
2. a gain on bargain purchase is recognized at the acquisition date.
3. a loss on bargain purchase is recognized at the acquisition date.
4. a contingent liability is recognized
5. Goodwill is recognized and tested for impairment on an annual basis.
Although the FASB for Business Combinations: Applying the Acquisition Method?Joint Project of the IASB and FASB has yet to be finalized, it includes information ...
The solution defines bargain method according to the applicable FASB not yet issued, and provides the rationale for the answer.