P2- Chapter 01, IFRS 3 - Eg: 3 (Viesturs and Baiba)

Ppbtpriyantha10y ago

Mr.Mike, everything is very clear,but, feel one doubt, We measured deferred payment @ PV, according to the IFRS - 3. in Eg: 03, Contingent liability (of 2,000,000) is also measured @ PV, whereas, the Standard say to measure contingents @ FV as of the date... Pls advice...... further, Baiba's profit become 2,200,000... is there necessity of re- assessment and adjustment... Thanks in advance BR, Priyantha

MikeLittleTutor10y ago#1

Is fair value in this context not the same as present value? Yes, when the additional 200,000 became apparent, the adjustment is not applied retrospectively. Such an adjustment goes through profit or loss

Ppbtpriyantha10y ago#2

Mr.Mike, Thanks for your prompt advice... Yes. understood. the fair value is the present value here. what about the loan note, If there is a loan notes issue, as a part of the consideration, then also, we need to calculate the present value of them, applying the same practice. Pls advice. Thanks in advance BR, Priyantha

MikeLittleTutor10y ago#3

We DO include the present value of the loan note issued as part of the consideration by the application of dcf principles But this is different than contingent consideration that needs adjustment when the contingency crystallises As we unroll the discount for the loan note we are going to arrive back at the full value of the loan repayable - we know this because it was us in charge of the discounting In the contingency situation, the outcome of the uncertain matter is entirely out of our hands Ok?

Ppbtpriyantha10y ago#4

Mr.Mike, Crystal clear You advice.....Thank you very much..... BR, Priyantha

MikeLittleTutor10y ago#5

you're welcome