Answered: 7. Which of the following must be…

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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Question

7. Which of the following must be done when accounting for depreciation under IFRS GAAP but can be done under U.S. GAAP?

a. Depreciate by function

b. Depreciate by nature

c. Depreciate by components

d. All of these

8. When accounting for contingent liabilities IFRS GAAP defines ‘probable’ as

a. likely

b. more likely than not

c. possible

d. none of these

9. When accounting for contingent liabilities U.S. GAAP defines ‘probable’ as

a. likely

b. more likely than not

c. possible

d. none of these

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.

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