Where the Consideration Transferred Is Less Than the Fair Value

question 25

Multiple Choice

Where the consideration transferred is less than the fair value of the identifiable net assets and contingent liabilities acquired, the difference must be recognised in the consolidation worksheet as:

• A) a transfer to the business combination valuation reserve.
• B) goodwill.
• C) an increase in the 'Shares in subsidiary' asset.
• D) a gain on bargain purchase.

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Definitions:

Investment Opportunity

An item or asset obtained with the intention of producing income or increasing in value.

Residual Income

The amount of income that an individual or company has after all personal debts and expenses, including the cost of capital, have been paid.

Required Rate Of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding expenses and revenues from financing and investing activities.