When accounting for a business combination a contingent liability is recognised if:
A) its fair value can be measured reliably.
B) it is a possible obligation and it is probable that it will occur.
C) it is a present obligation that has failed to meet the recognition criteria.
D) it is probable that an outflow of resources may occur in order to settle the obligation.

Question

Quizplus · Accepted Answer

A contingent liability is recognized in a business combination if its fair value can be measured reliably. This allows for the fair representation of the acquiring company's financial position post-acquisition.

When Accounting for a Business Combination a Contingent Liability Is