Page 20 - Topic 1 - 1.3. Business Combinations

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Acquisition method

• Contingent Consideration (.39 & .40)

• Business combinations are risky for acquirers

• Thus, consideration may contain contingent element

• i.e. part of total consideration based on future performance

• Dependent on uncertain future events

• E.g. profit target; share price movement; whether contract
awarded; etc.

• Fair value contingent consideration at acquisition

• Based on:

• Probability

• Time value of money

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