ShoSho Manufacturing is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. ShoSho's lawyer states that it is probable that ShoSho will lose the suit and be found liable for a judgment costing ShoSho anywhere from $1,800,000 to $4,600,000. However, the lawyer states that the most probable cost is $4,300,000. As a result of the above facts, what accounting recognition, if any, should be accorded this situation under IFRS? CEDE O A. ShoSho should accrue a loss contingency of $1,800,000 and disclose an additional contingency of up to $2,800,000. OB. ShoSho should not accrue a loss contingency but disclose a contingency of up to $1,800,000 OC. ShoSho should accrue a loss contingency of $4,300,000 and disclose an additional contingency of up to $300,000 OD. ShoSho should not accrue a loss contingency or disclose any contingency. hs

ShoSho Manufacturing is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. ShoSho's lawyer states that it is probable that ShoSho will lose the suit and be found liable for a judgment costing ShoSho anywhere from $1,800,000 to $4,600,000. However, the lawyer states that the most probable cost is $4,300,000. As a result of the above facts, what accounting recognition, if any, should be accorded this situation under IFRS? CEDE O A. ShoSho should accrue a loss contingency of $1,800,000 and disclose an additional contingency of up to $2,800,000. OB. ShoSho should not accrue a loss contingency but disclose a contingency of up to $1,800,000 OC. ShoSho should accrue a loss contingency of $4,300,000 and disclose an additional contingency of up to $300,000 OD. ShoSho should not accrue a loss contingency or disclose any contingency. hs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

ShoSho Manufacturing is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its
plant ShoSho's lawyer states that it is probable that ShoSho will lose the suit and be found liable for a judgment costing ShoSho anywhere from $1,800,000 to $4,600,000 However, the lawyer states that the
most probable cost is $4,300,000. As a result of the above facts, what accounting recognition, if any, should be accorded this situation under IFRS?
O A. Shosho should accrue a loss contingency of $1,800,000 and disclose an additional contingency of up to $2,800,000
OB. ShoSho should not accrue a loss contingency but disclose a contingency of up to $1,800,000
OC. ShoSho should accrue a loss contingency of $4,300,000 and disclose an additional contingency of up to $300,000
O D. ShoSho should not accrue a loss contingency or disclose any contingency.
4

most probable cost is $4,300,000. As a result of the above facts, what accounting recognition, if any, should be accorded this situation under IFRS? A. Shosho should accrue a loss contingency of $1,800,000 and disclose an additional
contingency of up to $2,800,000. B. Shosho should not accrue a loss contingency but disclose a contingency of up to $1,800,000 C. Shosho should accrue a loss contingency of $4, 300,000 and disclose an additional contingency of
up to $300,000 D. Shosho should not accrue a loss contingency or disclose any contingency

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