BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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it is a present obligation that has failed to meet the recognition criteria.
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it is a possible obligation and it is probable that it will occur.
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its fair value can be measured reliably.
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it is probable that an outflow of resources may occur in order to settle the obligation.
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Detailed explanation-1: -IFRS 3 requires the acquirer to recognise any contingent consideration as part of the consideration for the acquiree. It must be recognised at its fair value which is ‘the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction’.
Detailed explanation-2: -All assets acquired and liabilities assumed in a business combination are measured at acquisition-date fair value.
Detailed explanation-3: -Contingent consideration is classified as a liability or equity and is measured at fair value on the acquisition date. Contingent consideration that is classified as a liability is remeasured to fair value at each reporting date, with changes included in the income statement in the post-combination period.
Detailed explanation-4: -Contingent liabilities – The acquirer recognizes a contingent liability assumed in a business combination at the acquisition date if it is a present obligation arising from past events and its fair value can be measured reliability.
Detailed explanation-5: -12.11 The fair value of inventory acquired in a business combination is estimated as the value created prior to the acquisition date (subsequently referred to as the measurement date) based on market participant assumptions.