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Why is it different for a contingent liability in consolidated statements to the single entities accounts? And how is it different?
Am I right in saying that a contingent asset is not disclosed or recognised until it is virtually certain…. is this for both consolidation and single entity accounts?
Thanks
jemmaNo, anomalously, IFRS3 revised requires contingencies to be taken into account when calculating goodwill.
You’re right of course – this represents a built-in inconsistency and I don’t know why (before you ask) the IASB has done it.
No doubt they had their reasons but I have never researched them.
Sorry
Sorry I still do not understand.
So they are different for single entity accounts and consolidated? —– I take it in a single entities accounts a contingent libility is disclosed in the notes but for consolidation it is added into the Net assets of the subsidary aquired?
Also my comment on continget assets is this correct?
Thank you- sorry to be a pain 🙂
That’s what “anomalously” means! The treatment under IFRS3 for the purposes of calculating goodwill is different than for single entities and their treatment of contingencies
So you are correct in that contingencies are taken into account, even though the probability of them occurring may be remote – they are still included within the calculation of goodwill
For a non-consolidation, single entity situation, follow the “normal” rules for recognition / disclosure
Contingent assets, I believe, are treated the same way as contingent liabilities under IFRS 3 – that is, they are taken into consideration when computing goodwill
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