Bargain Purchase

Consider the following information from Alliance Data Systems Corporation 2009 10K.

On October 30, 2009, the Company assumed the operations of the Charming Shoppes' credit card program, including the service center operations associated with Charming Shoppes' branded card programs, portfolio and securitization master trust. The transaction consisted of purchasing existing accounts and the rights to new accounts along with certain other assets that are required to support the securitization program including retained certificates and interests, cash collateral accounts, and an interest-only strip, totaling a combined $158.9 million. The Company obtained control of the assets and assumed the liabilities on October 30, 2009, the acquisition date. The results of operations for this acquisition have been included since the date of acquisition and are reflected in the Private Label Services and Private Label Credit segments. The Company engaged a third-party specialist to assist it in the measurement of the fair value of the assets required. The fair value of the assets acquired exceeded the cost of the acquisition. Consequently, the Company reassessed the recognition and measurement of the identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. The excess value of the net assets acquired over the purchase price has been recorded as a bargain purchase gain, which is included in gain on acquisition of a business in the Company's consolidated statements of income. The following table summarizes the fair values of the assets acquired and liabilities assumed in the Charming Shoppes' acquisition as of the date of purchase.

As of October 30, 2009 (in thousands)

Current assets $ 24,910

Property, plant and equipment 491

Due from securitization 108,554

Identifiable intangible assets 67,200

Total assets acquired 201,155

Current Liabilities 8,500

Deferred tax liability 12,527

Total liabilities assumed 21,027

Net assets acquired $ 180,128

Total consideration paid 158,901

Gain on business combination $ 21,227

Required:

1. FASB ASC paragraph 805-30-50-1(f) requires a description of the reasons why the transaction

resulted in a gain. In addition, the acquirer is required to reassess the valuations if a bargain purchase

is indicated. Did Alliance Data Systems do either (or both) of these? Be specific.

2. Speculate as to some of the reasons that a bargain purchase might occur. Why has FASB struggled

to find the appropriate accounting for bargains (changing the rules repeatedly)?

3. Assuming the acquisition is an asset acquisition treated as a business combination, prepare the

journal entry on the acquirer's books to record the acquisition.