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can u pls tell me why cont cons is classified as a financial liability considering the fact tht the payment of the liability depends upon a future condition? and shouldn’t it just be disclosed as a ‘contingent liability’ as the happening of the condition is not probable always in every case
and by the way i wonder why even is it classified as a liability considering the fact tht it doesn’t raise a present obligation but which could be in the future, provided a certain condition is met?
please help me on this thought.
Hi,
It comes from IFRS 3 and is recorded as the consideration is likely to be paid as otherwise there would be no point in offering it as part of the consideration in the first place. So when it does get recorded then we have to use fair value, which will then take account of the likelihood of the consideration being paid. The more likely, the higher the fair value and the less likely the lower the fair value.
Thanks
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