Acquired assets and liabilities subject to contingencies are recognized at fair value if fair value can be determined as of the acquisition date or during the measurement period. If fair value cannot be determined, the acquirer should recognize the estimated amount of the asset or liability as part of the acquisition accounting if both of the following criteria are met: (1) it is probable that an asset existed or a liability had been incurred at the acquisition date based on information available prior to the end of the measurement period, and (2) the amount of asset or liability can be reasonably estimated.

If recognized at fair value on acquisition, an acquirer should develop a systematic and rational basis for subsequently measuring and accounting for assets and liabilities arising from contingencies depending on their nature. If the acquirer recognized an asset or liability under ASC 450 on the acquisition date, the acquirer should continue to follow the guidance in ASC 450 in subsequent periods. If the acquirer did not recognize an asset or liability at the acquisition date because none of the recognition criteria were met, the acquirer should account for such assets or liabilities in subsequent periods in accordance with other GAAP, including ASC 450, as appropriate.

A contingent liability is recognized in a business combination if it meets the definition of a liability and can be measured reliably. A contingent liability that is a present obligation arising from past events is recognized whether or not it is probable that an outflow of economic benefits will take place, but only if it can be measured reliably. An entity would not normally assume a significant contingent liability in a business combination without an assessment of the likelihood and magnitude of any potential outflow. Thus, entities are usually able to determine fair value with sufficient reliability.

The contingent liability is measured subsequently at the higher of (1) the amount initially recognized less, if appropriate, cumulative amortization recognized under the revenue guidance (IFRS 15), or (2) the best estimate of the amount required to settle the present obligation at the end of the reporting period under the provisions guidance (IAS 37).

Contingent assets are not recognized.