A.10 Goodwill and Bargain Purchase Gains

An acquiree that applies pushdown accounting must recognize the goodwill related to the acquisition in its separate financial statements. Certain items, such as liabilities that are not the legal obligation of the acquiree or bargain purchase gains, are not pushed down to the acquiree. Because these items are not pushed down to the acquiree’s financial statements on the acquisition date, there will be an adjustment to the acquiree’s APIC rather than to goodwill. However, a bargain purchase gain recognized by the acquirer is not recognized in the acquiree’s separate income statement even if the acquiree elects to apply pushdown accounting. An acquiree that elects to apply pushdown accounting recognizes a bargain purchase gain as an adjustment to APIC (or net assets of a not-for-profit acquiree) in its separate financial statements.

ASC 350-20 requires that an acquirer assign all goodwill acquired in a business combination on the acquisition date to the acquirer’s reporting units “that are expected to benefit from the synergies of the combination.” Such an allocation could result in a difference between the amount of goodwill recognized in the acquiree’s separate financial statements and the amount of goodwill assigned to the acquiree in the parent’s consolidated financial statements if some of the goodwill is assigned to one or more reporting units that do not include the assets or liabilities of the acquiree.