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The problem in BPP kit number 11, is adjusted based on Robby (june 2012) .
The scenario refers to 2 transactions related to the acquisition of Hail by Robby, which related to the calculation of goodwill on acquistion and the contingent liability of Hail. The acquistion at 1 June 20X2
– On 1 June 20X2, the fair value of the contingent consideration was measured at $40 million. contingent consideration is the further amount is payable on 31August 20X6 if the cumulative profits of Hail for the four-year period from 1 June 20X2 to 31May 20X6 exceed $150 million. On 31 May 20X3, this fair value was remeasured at $42 million.
-On 1 June 20X2, the fair value of contingent liability of Hail was reliably measured at $2 millionI want to ask why in adjusted SOFP which included the effect of acquistion of hail, the remeasurement of $$2m of contingent consideration as well as contingent liability of $2m only measured in equity and liabilties, but there is no corresponding recorded amounts related to assets? Does this contradict with IFRS?
Remeasurement of contingent consideration
– payable in cash – Dr Liability Cr P&L with change in fair value (or vice versa)
– payable in equity – no adjustment neededContingent liability
– increases liabilities and increases goodwill
All from IFRS 3.
🙂
I want to ask why non-current liabilities of adjusted SOFP at 31 may 20X3 do not incease by $2m due to contingent consideration? May be some errors in this amended problem?
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