bargain purchase

Definition

Acquiring an asset or company for less than its fair value, creating negative goodwill that accounting standards make you recognize as immediate income. It's so rare that its existence suggests either incredible luck or terrible accounting.

Example Usage

The fire-sale acquisition was treated as a bargain purchase, creating a one-time $20 million gain that we definitely won't mention complicates year-over-year comparisons.

Origin

Accounting treatment for acquisitions below fair value under IFRS and GAAP

Fun Fact

Bargain purchases increased dramatically during the 2008 crisis when banks bought distressed assets at pennies on the dollar, proving that accounting standards do occasionally encounter reality.

Source: Business combination accounting standards

Related Terms

Beginner

accounts receivable

Money owed to a company by customers who bought on credit—essentially IOUs that you hope will eventually become actual money. They're assets on paper until customers decide 'payment due in 30 days' is merely a suggestion.

💰 Finance / Accounting

Beginner

ROI

Return On Investment, the single most asked-about metric in any boardroom, and the one most likely to be fudged in a PowerPoint presentation. Every executive wants to know the ROI, and every department has a creative interpretation of what counts as a return.

📣 Marketing / Advertising💰 Finance / Accounting

Advanced

negative assurance

When auditors state they found nothing wrong in their limited review rather than affirmatively stating everything is correct. It's the professional equivalent of 'I didn't see any problems' rather than 'everything is definitely fine.'

💰 Finance / Accounting

Intermediate

cost basis

The original purchase price of an asset used to calculate capital gains taxes, proving that the IRS wants documentation of every financial decision you've ever made. Lose track of it and prepare for tax-time panic.

💰 Finance / Accounting

Beginner

Vertical Analysis

Expressing each financial statement line item as a percentage of a base figure, like revenue or total assets. It's financial statements in relative terms, making it easier to spot when expenses are getting out of hand.

💰 Finance / Accounting

Advanced

evergreening

The practice of rolling over short-term loans continuously to make them function as long-term financing, or cosmetically refreshing products to extend their revenue life. It's kicking the can down the road with extra steps.

💰 Finance / Accounting

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