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Dear tutor,
Under IFRS 3, contingent liabilties of the acquiree have to be recognised on business combination.
Subsequently, it must be measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or the amount initially recognised less, if appropriate, cumulative amortisation recognised in accordance with IFRS 15 Revenue.
1. May i know what does the subsequent measurement mean? What has gotta do with IFRS 15 in this case?
2. Is there any deferred tax implications on the recognition of contigent liability in a business combination? (since the net assets acquired is decreased due to the recognition of contigent liability)
Thank you in advance!
1. Subsequent measurement = SFP date. I don’t know why are you referring to IFRS 15 – my golden rule is to stick to the knowledge on ias plus:
https://www.iasplus.com/en/standards/ifrs/ifrs3
2. Could be DT – examiner would mention this in the question.
1. “Until a contingent liability is settled, cancelled or expired, a contingent liability that was recognised in the initial accounting for a business combination is measured at the higher of the amount the liability would be recognised under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and the amount less accumulated amortisation under IAS 18 Revenue. [IFRS 3.56]”
It was taken from the ias plus. May I know what is the “accumulated amortisation under IAS 18 Revenue” referring to?
2. Noted, thank you!
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