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In consolidation why is deffered liability considered In group account ?
it is a liability which is owed to the subsidiary which is part of the group that means when we recognise deffered liability we are recording a liability which we owe to ourselves wouldn’t that be wrong
Hi,
It is recognised as we can attribute it a fair value and hence recognise it within the group accounts only. It remains disclosed as a contingent liability in the individual accounts of the subsidiary.
If we do not recognise it then it might look like we may not have paid the appropriate amount of consideration as the net assets acquired would be too high in comparison to the consideration paid. By recognising the contingent liability in the group accounts the net assets acquired are then lower showing a more accurate reflection in comparison to what we have paid.
Thanks
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