CERTYNEX IFRS ACADEMY

The former owners of Arve SA contractually indemnify the acquirer in respect of an uncertainty about a particular liability of the acquiree. How does the acquirer treat this indemnity at the acquisition date?

It recognises an indemnification asset measured on the same basis as the indemnified liability.

It recognises nothing before cash is received, the indemnity being at this stage a mere contingent right.

It recognises the asset at the fair value of the indemnity, unrelated to the measurement basis of the indemnified liability.

It directly reduces the indemnified liability by the amount of the indemnity, without recognising a separate asset.