On this page
Worked-example setupScope and assumptions
- The acquired set qualifies as a business, Cedar Ridge is the accounting acquirer, and all stated amounts are acquisition-date US GAAP measures.
- The review finds no noncontrolling interest, prior equity interest, measurement-period issue, tax effect, or other consideration component.
- Period
- Acquisition date
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Problem
Cedar Ridge transfers $4,700,000 for a business. Its first worksheet shows $6,200,000 of identifiable assets and $900,000 of liabilities. The required review then identifies a $300,000 environmental liability that the first worksheet omitted. Compute the first result and the reviewed result.
Reassess before recognition
The first-pass net assets are $5,300,000. Compared with $4,700,000 of consideration, that worksheet shows a $600,000 excess. Cedar Ridge cannot recognize that amount immediately. ASC 805 requires reassessment before a bargain-purchase gain is recognized.
Adding the omitted $300,000 liability reduces reviewed net assets to $5,000,000. The remaining excess is:
$5,000,000 reviewed identifiable net assets
− $4,700,000 consideration transferred
= $300,000 bargain-purchase gain
After completing the stipulated review, Cedar Ridge recognizes the $300,000 gain in earnings on the acquisition date. It does not recognize the first-pass $600,000 result, report negative goodwill, or defer the reviewed gain.
Boundary
The example checks the supplied arithmetic and one corrected omission. It does not perform valuation or prove that a real acquisition review is complete. Scope, acquirer, consideration, noncontrolling interest, prior interests, identification, measurement, and disclosures require evidence in a real file.
Verified calculation · scoped sums
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- amounts
- 4 fields
Inspect data
{
"consideration_transferred": -4700000,
"identifiable_assets": 6200000,
"liabilities_first_pass": -900000,
"omitted_environmental_liability": -300000
}- totals
- 4 fields
Inspect data
{
"first_pass_excess": [
"identifiable_assets",
"liabilities_first_pass",
"consideration_transferred"
],
"first_pass_net_assets": [
"identifiable_assets",
"liabilities_first_pass"
],
"reviewed_bargain_purchase_gain": [
"identifiable_assets",
"liabilities_first_pass",
"omitted_environmental_liability",
"consideration_transferred"
],
"reviewed_net_assets": [
"identifiable_assets",
"liabilities_first_pass",
"omitted_environmental_liability"
]
}Recomputed result
| Measure | Value |
|---|---|
| first pass excess | 600,000 |
| first pass net assets | 5,300,000 |
| reviewed bargain purchase gain | 300,000 |
| reviewed net assets | 5,000,000 |