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Hi Mike, I have a few doubts hoping you could help me on these. I’ll post the questions separately if it’s alright.
(Read this from BPP study text)
Contingent liabilities of an acquiree, as a result of a business combination, are recognized if their fair value can be measured reliably. This is a departure from the normal rules in IAS 37.
After their initial recognition, they would be measured by the acquirer at the higher of:
A. The amount that would be recognized in accordance with IAS 37
B. The amount initially recognizedHow should the acquirer present the contingent liabilities of the acquiree in its financial statements?
“The amount that would be recognized in accordance with IAS 37”
What amount is this?
““The amount that would be recognized in accordance with IAS 37”
What amount is this?”
This is saying that it should be treated as a provision at the higher of (a) a revised estimate or (b) the original estimate
OK?
OK thanks 🙂 , so the contingent liability should be treated exactly like a provision under the consolidated group accounts, is it correct?
Correct – and that’s a different treatment of contingencies than prescribed by IAS 37
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