Answered: 1. Statement 1: Measurement period is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Statement 1: Measurement period is relevant if Fair Value of Net Assets of acquiree includes the recognition of contingent asset, contingent liability and assets/liabilities with provisional amounts.

Statement 2: Measurement period is relevant for the remeasurement of all contingent considerations.

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Both statements are incorrect.

Both statements are correct.

Only statement 2 is correct.

Only statement 1 is correct.

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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