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Contingent liabilities

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Contingent liabilities

  • This topic has 5 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 26, 2016 at 1:09 am #346036
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    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 recognized

    How 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?

    October 26, 2016 at 7:53 am #346075
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    ““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?

    October 26, 2016 at 8:39 am #346083
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    OK thanks 🙂 , so the contingent liability should be treated exactly like a provision under the consolidated group accounts, is it correct?

    October 26, 2016 at 9:24 am #346085
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Correct – and that’s a different treatment of contingencies than prescribed by IAS 37

    October 26, 2016 at 10:35 am #346096
    complicated
    Member
    • Topics: 110
    • Replies: 210
    • ☆☆☆

    Alright, thank you!

    October 26, 2016 at 3:33 pm #346131
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    You’re welcome

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