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In Dec 2012 Q1(a) – the answer include adjustment for contingent liability.
My question is, contingent liabilities are not recognised in the statements but rather disclosed.So how can the increase in contingent liability be included in goodwill calculation?
If it is recorded for a reason what is the other entry to record it in cons.SFP?
Hi – yes, it’s a strange one isn’t it! But according to IFRS 3 (revised) we should include contingent liabilities in the goodwill calculation and treat them as though they were actual confirmed obligations
The “other side”? Dr Cost of Control Account and Cr Contingent Liability Account – it appears on the statement of financial position!
OK?
Hi! yeah its strange…i understood the first part Thanks alot.
But what is cost of control account? first time hearing it 🙁
Do we have to show a contingent liability under NCL?
Cost of control account is the working to calculate goodwill.
It doesn’t appear again after we have calculated goodwill (goodwill is the balancing figure after we have listed all the elements of consideration and deducted the fair value of the net assets acquired. That throws out a goodwill figure and we never see / hear / think about this cost of control account until we acquire our next subsidiary – but that’s not going to happen to you until next year when you arrive at P2 🙂
Yes, contingent liabilities go under Liabilities in the consolidation. Whether it’s current or non-current really depends on the likely timing / crystallisation
On I really got confused. In June15 past paper only net assets at aquisition is adjusted for continjent liability. Why it is not also adjsusted in net assets at reporting and also in current/non current liabilities ?
I am studying P2
I am sorry, december 2014, 3rd adjustment
Lilit!
This is a forum for F7
I’m no longer answering questions for P2 – that’s down to Chris and Chris doesn’t have the free time that I do
You will have to be patient and I’m sure that he WILL come back to you (I assume that you have already posted this on the P2 Ask ACCA Tutor forum)
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