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Dear Professor,
Specimen 1: Q1)Kutchen co. part d)
“IAS 32 states that a contingent obligation to pay cash which is outside the control of both parties to a contract meets the definition of a financial liability which shall be initially measured at fair value.”
Professor i found this line in my exam kit. I think it has a flaw! i think it should not say financial liability.
Isnt it exact definition of a contingent liability? which reads something like this i believe: “Present obligation as a result of a past event whose occurrence or non-occurrence will depend on future events beyond the control of the entity”
Discussion question, so they are testing knowledge of definitions. There may be no right answer.
But I would say that, as the transaction is in connection with the purchase of a business, I think consideration should be RECOGNISED not DISCLOSED.
As contingent liabilities are never recognised, I guess that makes it a financial liability.
🙂
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