Bargain purchase gain
Before recognising the gain, reassess whether all acquired assets and assumed liabilities have been identified and review the measurement procedures. If the excess remains, recognise the gain in profit or loss on the acquisition date. The calculation includes consideration transferred, any non-controlling interest and the fair value of a previously held interest; it is not merely net assets less cash paid in every acquisition.
Worked example
An acquirer pays $700,000 for all of a business. Identifiable net assets measure $750,000, with no previous interest or non-controlling interest. After the required reassessment, the $50,000 excess is a bargain purchase gain in profit or loss.
Common mistake
Recording the excess as negative goodwill liability or ignoring non-controlling interest and an existing ownership interest when calculating the gain.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
