Treatment of Bargain Purchase

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    shimmer
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    Hello
    I have a doubt regarding the treatment of Bargain purchase in the question Highmoor. In the answer, Bargain purchase has been added to Retained Earnings. Why is that? What actually happens when there’s a bargain purchase? Is it a profit for the acquirer which is why they add it to Retained earnings? If yes, then do we add it to Gross profit in Consolidated Income Statement?
    Here’s the link to the question: http://opentuition.com/groups/f7-financial-reporting/documents/


    Avatar of MikeLittle
    MikeLittle
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    No, according to IFRS3 revised, and “negative goodwill” ( bargain purchase “profit” ) should be credited to Retained Earnings at the first opportunity ie in the first set of Financial Statements after the acquisition. And it will be in the group retained earnings – not the parent’s


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    shimmer
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    What do you mean by the first set of financial statements? And how do we treat it in the Consolidated Income Statement?


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    MikeLittle
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    First set of consolidated financial statements after the acquisition. And it’s added to consolidated retained earnings in the Statement of Changes in equity

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