The way in which lawsuit should be reported under IFRS. Given information: 60% probability is of loss. The estimated range is $400,000 to $500,000.

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Answer 1

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.9E

a.

To determine

The way in which lawsuit should be reported under IFRS.

Given information:

60% probability is of loss.

The estimated range is $400,000 to $500,000.

b.

To determine

To prepare: The required journal entry.

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ccess the FASB Accounting Standards Codification at the FASB website (www.fasb.org).Required:1. Obtain the relevant authoritative literature on recognition of contingent losses. What is the specific citationthat describes the guidelines for determining when an expense and liability should be accrued for a contingentloss?2. List the guidelines.

Part a. The two basic requirements for the accrual of a loss contingency are supported by several basic concepts of accounting.Three of these concepts are the period of time assumption the recognition principle and the qualitative characteristic of verifiability. Required: Discuss how the two basic requirements for the accrual of a loss contingency relate to the tree concepts mentioned above. Part b. The following three independent sets of facts relate to (1) the possible accrual or (2) the possible disclosure by other means of a loss contingency Situation I A company offers a 1 year assurance type warranty for the product that it manufactures. A history of warranty claims has been compiled and the probable amount of claims related to slaes for a given period can be determined. Situation II Subsequent to the date of a set financial staements, but prior to the issuance of the financial statements, a company enters into a contract that will probably result in a significant loss to the…

Part a. The two basic requirements for the accrual of a loss contingency are supported by several basic concepts of accounting. Three of these concepts are the period of time assumption, the recognition principle, and the qualitative characteristic of verifiability. Required: Discuss how the two basic requirements for the accrual of a loss contingency relate to the three concepts mentioned above. Part b. The following three independent sets of facts relate to (1) the possible accrual or (2) the possible disclosure by other means of a loss contingency. Situation I A company offers a 1-year assurance-type warranty for the product that it manufactures. A history of warranty claims has been compiled and the probable amount of claims related to sales for a given period can be determined. Situation II Subsequent to the date of a set of financial statements, but prior to the issuance of the financial statements, a company enters into a contract that will probably result in a significant…

Answer 2

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.9E

a.

To determine

The way in which lawsuit should be reported under IFRS.

Given information:

60% probability is of loss.

The estimated range is $400,000 to $500,000.

b.

To determine

To prepare: The required journal entry.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.9E

a.

To determine

The way in which lawsuit should be reported under IFRS.

Given information:

60% probability is of loss.

The estimated range is $400,000 to $500,000.

b.

To determine

To prepare: The required journal entry.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.9E

a.

To determine