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M/s X purchased M/s Y and there was contingent liability disclosed in M/s Y’s Statement in the form of a legal suit. I know definitely it has to be recognized in the Consolidated Statements while calculating the Good will (Good will value will be increased to that extent)..
My doubt is what will be the treatment when M/s Y succeed in the suit and established no more a liability. What should be the treatment for this in consolidated FS. Is it possible to adjust the goodwill value if the reversal happens with in time span (1 year) or recognize in P&L ?
Hi,
No we do not adjust the goodwill, providing any changes took place 12 months after the acquisition. Any adjustment after 12 months will impact the net assets at the reporting date and therefore the post acquisition movement.
If the change happens within 12 months then the net assets at acquisition are adjusted and the goodwill figure is therefore changed too.
Thanks
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