What is negative goodwill in SAP FI-LC - Consolidation?

SAP Term: negative goodwill

• Component: FI-LC

• Component Name: Consolidation

• Description: A credit-side differential that can occur during the consolidation of investments. Negative goodwill appears in the stockholders' equity section of the balance sheet. This occurs when the purchase price of a company acquired is less than the sum of the fair market value or book value of the net assets acquired. Possible causes of negative goodwill are either a lower purchase price because of the poor prospects of the company to be acquired or an annual net income that occurred between the time of acquiring the shares and the first consolidation, but which was not distributed to the shareholders.

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• Key Concepts: 
  Negative goodwill is an accounting concept that occurs when the purchase price of an acquired company is lower than the fair value of its net assets. In other words, the buyer pays less for the company than the value of its assets. This is a rare occurrence and is usually caused by a mispricing of the assets or liabilities of the acquired company. In SAP FI-LC Consolidation, negative goodwill is recorded as a gain in the consolidated financial statements. 
  
  How to use it: 
  In SAP FI-LC Consolidation, negative goodwill is recorded as a gain in the consolidated financial statements. This gain is calculated by subtracting the purchase price from the fair value of the net assets. The gain is then recognized in the consolidated financial statements and can be used to offset any losses incurred during the acquisition process. 
  
  Tips & Tricks: 
  When recording negative goodwill in SAP FI-LC Consolidation, it is important to ensure that all relevant information about the acquisition process is accurately recorded. This includes details such as purchase price, fair value of net assets, and any other costs associated with the acquisition. Additionally, it is important to ensure that all relevant accounting standards are followed when recording negative goodwill in SAP FI-LC Consolidation. 
  
  Related Information: 
  Negative goodwill can also be referred to as a bargain purchase or a bargain purchase gain. It is important to note that negative goodwill does not always result in a gain for the buyer; it can also result in a loss if the fair value of net assets is lower than the purchase price. Additionally, it is important to note that negative goodwill does not always have to be recorded in SAP FI-LC Consolidation; it can also be recorded in other accounting systems such as SAP ERP or SAP S/4HANA.