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hello mike
in future and deferred considerations we discount the figure and use pv and then unwind the discount.
but lets say we have contingent consideration and the condition is that we pay 30m in three years time if the subs profit is above 40% after 3 years.
how should we account this? do we discount the 30m in our goodwill working or will the examiner provide us the fv of this 30m to be used in the calculation of goodwill?
thanks
“do we discount the 30m in our goodwill working”
Yes
“or will the examiner provide us the fv of this 30m to be used in the calculation of goodwill”
The examiner will give you, one way or another, sufficient information for you to complete the goodwill working (if that’s what (s)he wants)
You may be faced with “Ignore the time value of money” or “The present value of this $30 million at date of acquisition was $24 million” or “the following are the discount factors for three years at 8%, 10% and 12%” and within the question there would in that case be two or more matters to discount
Whatever the case, the examiner never leaves you having to guess … there is always sufficient information for you to be definitive
OK?
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