What value should be recorded as the fair value of a contingent consideration arising from a business acquisition when it is classified as a liability?
A) The undiscounted maximum amount that could be paid.
B) The discounted present value of the maximum amount that could be paid.
C) The undiscounted probabilistic estimate of the amount to be paid.
D) The discounted probabilistic estimate of the amount to be paid.

Question

Quizplus · Accepted Answer

The fair value of a contingent consideration classified as a liability should be recorded at the discounted probabilistic estimate of the amount to be paid. This approach reflects both the time value of money and the uncertainty of the payment.

What Value Should Be Recorded as the Fair Value of a Contingent