ABC plc acquired 100% of the shares in DEF Ltd from XYZ plc for C100m in cash. DEF Ltd manufactures and sells widgets. At the time of acquisition, DEF Ltd is the plaintiff in a class action court case whereby a group of DEF Ltd's customers have alleged that its products are faulty. The claimants are suing DEF Ltd for damages of C30m. XYZ plc has indemnified ABC plc for losses up to C20m. The amount relating to damages has not been recognised as a provision, as it is not considered probable. How should the management of ABC plc account for the indemnification acquired as part of the business combination in the separate financial statements of ABC Plc on the date of acquisition?
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