Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated 31 s t December 2018 under IFRS. Given information: Company G has gone through a case in which Company P sued for patent infringement. As of December 31 s t , 2018, the case was in the early stage and the company believed that they are likely to win. By the end of the year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31 s t March 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

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Answer 1

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 2JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated 31^s^t December 2018 under IFRS.

Given information:

Company G has gone through a case in which Company P sued for patent infringement. As of December 31^s^t, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of the year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^s^t March 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

How the contingency should be reported as of December 31^s^t, 2019 under IFRS.

3.

To determine

How the contingency should be reported as of December 31^s^t, 2020 under IFRS.

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Answer 2

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 2JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated 31^s^t December 2018 under IFRS.

Given information:

Company G has gone through a case in which Company P sued for patent infringement. As of December 31^s^t, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of the year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^s^t March 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

How the contingency should be reported as of December 31^s^t, 2019 under IFRS.

3.

To determine

How the contingency should be reported as of December 31^s^t, 2020 under IFRS.

Expert Solution & Answer

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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 2JC

1.

To determine

Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated 31^s^t December 2018 under IFRS.

Given information:

Company G has gone through a case in which Company P sued for patent infringement. As of December 31^s^t, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of the year 2019, the case progressed and potential liability was estimated between $1 million to $3 million. By 31^s^t March 2020 the company realized that they are going to lose the case while the loss estimated at that time was $4 million.

2.

To determine

How the contingency should be reported as of December 31^s^t, 2019 under IFRS.

3.

To determine

How the contingency should be reported as of December 31^s^t, 2020 under IFRS.

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 2JC

1.

To determine