- This topic has 8 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
hi Sir
I have mentioned my understanding with regard to the issues please need your expert opinion for my peace of mind.
Contractual rights
In case of contractual rights in IAS 38 we need to consider “contingent consideration in the cost of contractual rights upon initial recognition” how do we measure it subsequently.
my understanding
will increase or decrease effect cost of contractual rights and we will increase the cost of intangible assest and amortize it on remaining useful life.
Goodwill
In case of goodwill the contingent consideration become part of the calculation of good will. how do we measure any change in contingent consideration subsequently?
my understanding
if subsequent change is as a result of event existed at the date of acquisition then we need to adjust it to the cost of goodwill, if change in consideration is as a result of events after reporting period we shall recognize it as a provision or financial liability or in case of equity instrument we shall not consider any subsequent change in fair value.
Contractual rights
I do not understand what you are asking. Can you give me an example please?
Goodwill
Your understanding is perfect. If we obtain additional information about conditions on the acquisition date within 12 months goodwill will change.
sir for contractual rights please refer to March 2020 Question 3 part b ii
Acca standard solution mentioned about the reassessment but I wonder if there is a change in value of contingent consideration how will it be account for in subsequent measurement.
If you are likely to have to pay some more money for the player you will add that cost to the cost of the intangible.
The intangible will then be amortised over the life of the contract subject to impairment
For the contingent consideration in case of good will
we will show Dr to cost of investment and disclose contingent liability. and in case if increase we account for it as a provision with corresponding effect in profit and loss if it relate to the period after measurement period allowed by the standard IFRS 3.
my question is what will be the second effect in parent book for contingent consideration included in cost of investment of subsidiary?
as per your description
“If you are likely to have to pay some more money for the player you will add that cost to the cost of the intangible.The intangible will then be amortised over the life of the contract subject to impairment”
BUT
in contractual rights, contingent consideration is already a part of intangibles. at initial recognition we will
Dr Intangibles
Cr Financial instruments / Provisions Equityif subsequently there is any change why don’t we increase the financial liability? why we are adding to the cost of intangibles.
The rules for acquisition of a subsidiary with goodwill states that all consideration must be measured at fair value. The actual fair value would depend on the probability. IFRS 3
I thought you were asking me about the rules for acquisition and intangible assets which are completely different. If you are just buying an intangible asset like a football player you would recognise the contingent consideration if probable.IAS 38
Sorry for the confusion Sir !!! accept my apologies…
this para is from march 2020 solution question 3 part b ii
“When a player’s contract is signed, management should make an assessment of the likely outcome of performance conditions. Contingent consideration will be recognised in the players’ initial registration costs if management believes the performance conditions will be met in line with the contractual terms. Periodic reassessments of the contingent consideration should be made.
Any contingent amounts which the directors of Leria Co believe will be payable should be included in the players’ contract costs from the date management believes that the performance conditions will be met. Any additional amounts of contingent consideration not included in the costs of players’ registrations will be disclosed separately as a commitment. Amortisation of the costs of the contract will be based upon the length of the player’s contract.”
in this para what confuse me is this statement
“Any contingent amounts which the directors of Leria Co believe will be payable should be included in the players’ contract costs from the date management believes that the performance conditions will be met. Any additional amounts of contingent consideration not included in the costs of players’ registrations will be disclosed separately as a commitment. ”
this mean if at initial recognition we didn’t add contingent consideration then we can add it at subsequent measurement”
- You must be logged in to reply to this topic.