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Hello Mike
why did we have to take Contingent Liability into account when doing net assets for subsidiary?
Contingent Liability is disclosed when an obligation is possible unlike provision. why are we then including these in our accounts as numbers?
Hi,
We include it in the net assets of the subsidiary under IFRS 3 as if you were buying the subsidiary then you would probably pay less knowing that there is a potential liability in the future. To therefore match up the acquisition cost of the subsidiary to the true worth of what we’re acquiring we need to adjust the net assets. Don’t forget to also include the contingent liability on the face of the group SFP.
Thanks
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