Accounting Standards and Guidance

FRC Financial Reporting Standards (FRSs)

UK/Irish accounting framework (effective for periods beginning on or after 1 Jan 2015)

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

Business Combinations and Goodwill

Purchase method

Section 19 – Contingent liabilities

19.20

Paragraph 19.15(c) specifies that the acquirer recognises separately a provision for a contingent liability of the acquiree only if its fair value can be measured reliably. If its fair value cannot be measured reliably:

(a)

there is a resulting effect on the amount recognised as goodwill or the amount accounted for in accordance with paragraph 19.24; and

(b)

the acquirer shall disclose the information about that contingent liability as required by Section 21.

19.21

After their initial recognition, the acquirer shall measure contingent liabilities that are recognised separately in accordance with paragraph 19.15(c) at the higher of:

(a)

the amount that would be recognised in accordance with Section 21; and

(b)

the amount initially recognised less amounts previously recognised as revenue in accordance with Section 23 Revenue.

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