ABC Ltd. acquired a beverage company POR Ltd. from XYZ Ltd. At the time of the acquisition, PQR Ltd. is the defendant in a court case whereby certain customers of POR Lid. have aleged that its products contain pesticides in excess of the permissible levels that have caused them health damage. PQR Ltd. is being sued for damages of ? 2 crore. XYZ Ltd. has indemnified ABC Ltd. for the losses, if any, due to the case for amount up to 7 1 crore. The fair value of the contingent liability for the court case is 70 lakh. How should ABC Ltd. account for the contingent liability and the indemnification asset? What if the fair value of the liability is 7 1.2 crore instead of 70 lakh. Solution