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at the time of business combination with margy (subsidairy)the joey (parent) has included in the fairvalue of margy identifiable net assets an unrecognised contingent liability of 6 million in respect of a warranty claim in progress against margy.in march 2014,there was a revision of the estimate of the liability to 5 million the amount has met the criteria to be recognised as a provision in current liabilties in the financial statements of margy and the revision of the estimate is deemed to be a measurement period adjustment.sir how this scenario is deal please help me regarding this
$6m will have been recorded as a liability as at date of acquisition. Now, within the 12 months subsequent, further information enables us to put a more accurate value on this liability.
Dr Liability $1m
Cr Profit or Loss $1mNow we are showing the liability at a more realistic valuation of $5m
Ok?
Dear Mike,
I understand the revision bit. Why do we credit (credit entry) the consolidated financial statements by $5m.
RE $3.5m & NCI $1.5m
Thanks
I don’t understand your question! I have never mentioned crediting the consolidated financial statements with $5m
At date of acquisition the previously unrecognised liability will have been recorded in accordance with IFRS3 revised so now, immediately after acquisition, there is a liability in the subsidiary records of $6m and goodwill will have been correspondingly affected
Within the 12 month post-acquisition period, there is a reassessment of the value of this liability and it’s to be reduced by $1m
Dr Liability
Cr Profit or Lossin the subsidiary’s records
Working 4A NCi on the SoFP takes value at date of acquisition + share of post-acq retained – their share of any goodwill impairment
By giving the nci their share of post-acq retained we are giving them automatically their share of this $1m adjustment
Is that not clear?
sir but depreciation is the same case we adust it in (net asset at acquisition and reporting working) and from there it is shared between NCI and GROUP RETAINED EARNINGS
but NON CURRENT ASSET is credit with depreciation in sofp
in the case above why we should not recognize 5m current liability as it meets criteria of recognizing per question
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