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A contingent consideration arrangement promises ₹50 cr extra if the acquiree's EBITDA exceeds ₹100 cr in the year after acquisition. The arrangement is classified as a financial liability under Ind AS 109. By year-end FV has moved from ₹30 cr to ₹42 cr because the target became likelier. Identify the correct accounting.
ARecognise ₹12 cr in P&L per Ind AS 109 — this is NOT a measurement-period adjustment because it reflects events AFTER acquisition (target progress), not new info about acquisition-date facts
BRecognise ₹12 cr in OCI as a reserve
CAdjust the ₹12 cr against goodwill (measurement-period adjustment)
DDefer the ₹12 cr until cash settlement
Answer & Solution
Correct answer: A. Recognise ₹12 cr in P&L per Ind AS 109 — this is NOT a measurement-period adjustment because it reflects events AFTER acquisition (target progress), not new info about acquisition-date facts
FV movements after acquisition driven by post-acquisition events (earnings progress, share price, milestone progress) are NOT measurement-period adjustments. For Ind AS 109 contingent consideration, FV changes go to P&L. Goodwill is not touched.
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