What is the purpose of the business combination valuation entries?

When Garmix Ltd secured ownership of all the shares of Vital Ltd, Vital Ltd was involved in a court case with a former employee. Vital Ltd disclosed this information as a contingent liability in its accounts, and the companys solicitor determined the fair value of the probable payout to settle the case would be $120,000.

Discuss with the class if an adjustment is required on consolidation for a contingent liability and why? If an adjustment is required show the class the necessary journal entry.