The net amount of employee benefit liabilities acquired in a business combination are measured by using the:
A) estimated total of future cash outflows, undiscounted.
B) face value of the liabilities.
C) present value method.
D) cash method.

Question

Quizplus · Accepted Answer

The present value method is used to measure the net amount of employee benefit liabilities acquired in a business combination. This involves estimating future cash outflows and discounting them to their present value. This approach takes into consideration the time value of money and provides a more accurate estimate of the liability than simply using the undiscounted cash flows or face value of the liabilities. The cash method and the estimated total of future cash outflows, undiscounted are not appropriate methods to measure employee benefit liabilities in a business combination.

The Net Amount of Employee Benefit Liabilities Acquired in a Business