i) Liabilities Related to Restructurings or Exit Activities:

Under IFRS 3, liabilities related to restructurings or exit activities of the acquiree should only be recognized at the acquisition date if they are pre-existing liabilities of the acquiree and were not incurred solely for the benefit of the acquirer. In other words, if the restructuring or exit activities were initiated by the acquiree before the acquisition, then the related liabilities should be included in the acquisition accounting.

However, if the acquirer plans to undertake new restructuring activities as part of the acquisition, these costs are not recognized as part of the acquisition accounting. Instead, they are treated as post-acquisition expenses and are recognized in the post-combination period when the related costs are incurred and the criteria under IAS 37 (Provisions, Contingent Liabilities and Contingent Assets) are met.

Marks: 3

ii) Contingencies:

IFRS 3 requires that contingencies be accounted for as follows:

• Contingent liabilities: The acquirer must recognize at fair value any contingent liabilities assumed in the business combination, provided they are present obligations arising from past events and can be reliably measured, even if the liability is not probable.
• Contingent assets: Contingent assets, on the other hand, are not recognized at the acquisition date, as IAS 37 does not permit the recognition of contingent assets until they are virtually certain.

After the acquisition date, contingent liabilities are remeasured to the higher of the amount that would be recognized under IAS 37 or the initial amount, adjusted for amortization in line with IFRS 15 (Revenue from Contracts with Customers).