Merger Deficit

[suki]

What Does it Mean? An accounting term used to describe the situation when the total value of the share capital used to purchase another company is less then the total value of the equity purchased. The merger does not necessarily have to be an all-stock acquisition. is the above what we can call Negative Goodwill?

[Harathke]

No, negative goodwill is when the net asset of the business bought are worth more than the price paid for...i.e. once everything is capitalized into the acquirors books there is a credit to the income statement called "negative goodwill" that produces "income" for the acquiror. Meger deficit is when the script issued is worth less than the paper price attached to it. For example, Company A buys Company B by issuing 100 shares at 50c each...but Company A's shares are only trading at 30c each. Make sense?

[suki]

it makes sense. thank you.