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Sir
please I dont understand why a negative goodwill is called bargain. the goodwill is an intangible asset, why is a profitable for the company if it is negative as I think it becomes a liability.Negative goodwill arises because the amount that we have had to pay to acquire the subsidiary is lower than the our share of the fair values of the assets acquired.
You say that goodwill is an asset and therefore negative goodwill must be a liability. Think of this another way. The asset goodwill will be impaired over a number of years and therefore converted into an expense.
Negative goodwill is a credit balance and a credit balance (going back to F3 days!) is either a liability or an income. Because we write negative goodwill off at the earliest opportunity, it’s seen as an income! Thnk about it – if you buy a F1 racing car for $200,000 and it’s actual fair value is $1,200,000 does that mean that you have acquired a liability – a negative figure Dr F1 car account $1,200,000 Cr Cash $200,000 and credit what? A liability account?
Better?
Good, but keep posting whenever you get to something that you cannot resolve
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