If a Contingent Liability of a Subsidiary Is Recognised in a Business

question 23

Multiple Choice

If a contingent liability of a subsidiary is recognised in a business combination,on consolidation the group will record:

• A) a deferred tax liability.
• B) a deferred tax asset.
• C) a reduction in goodwill.
• D) none of the above.

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Definitions:

Shrinkage

The loss of inventory that can occur due to theft, damage, or errors in a company's stock.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before preparing financial statements.

Operating Expenses

Costs associated with the day-to-day functions of a business excluding the cost of goods sold.

Fiscal Year

A fiscal year is a one-year period designated for accounting and financial reporting purposes, differing from the traditional calendar year.