Correction
A negative first-pass residual is a stop signal. Reassess the identification of assets and liabilities and review the required measurements before recognizing a bargain-purchase gain. Recognize only the excess that remains after that review. The reviewed excess goes to earnings rather than a negative goodwill balance or a deferred credit.
Where to watch
When this mistake may appear
- Identifiable net assets exceed the applicable consideration measure on the first acquisition worksheet.
Check your work
Your work may contain this mistake if:
- Records the first difference as a gain.
- Calls the amount negative goodwill.
- Skips the identification and measurement review.