Asked by Adrian Batista on May 26, 2024
Verified
The net amount of employee benefit liabilities acquired in a business combination are measured by using the:
A) estimated total of future cash outflows, undiscounted.
B) face value of the liabilities.
C) present value method.
D) cash method.
Employee Benefit Liabilities
Obligations owed by an employer to its employees as part of an employee benefit program, such as pensions, post-retirement health benefits, and other forms of deferred compensation.
Present Value Method
A technique used to determine the current worth of a future cash flow, considering the time value of money.
- Identify and apply the appropriate recognition and measurement principles for assets, liabilities, and contingent liabilities in a business combination.
Verified Answer
NE
Naxish EhtashamMay 27, 2024
Final Answer :
C
Explanation :
The present value method is used to measure the net amount of employee benefit liabilities acquired in a business combination. This involves estimating future cash outflows and discounting them to their present value. This approach takes into consideration the time value of money and provides a more accurate estimate of the liability than simply using the undiscounted cash flows or face value of the liabilities. The cash method and the estimated total of future cash outflows, undiscounted are not appropriate methods to measure employee benefit liabilities in a business combination.
Learning Objectives
- Identify and apply the appropriate recognition and measurement principles for assets, liabilities, and contingent liabilities in a business combination.
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