Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 13, Problem 13.6P
a.
To determine
The way in which each lawsuit is accounted for under IFRS and preparing journal entries for the same.
Given information:
Company is having a
b.
To determine
The comparison between litigation loss and contingent liability at the end of the year under U.S GAAP and IFRS.
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Q.1.3 During the previous financial year, a competitor began litigation against Isomin Ltd
(4)
regarding a dispute over a design. On 10 April 2021, a judge decided that Isomin Ltd
should pay the competitor R45 000 without leave to appeal. Isomin Ltd had treated
this matter as a contingent liability in the 31 March 2020 financials.
E9-22 Gain Contingency On December 31, 2019, Braino Tech Inc. learned that its competitor had introduced a prod-uct using an accessory to which Braino has exclusive patent rights. Braino planned to file suit and its attorneys esti-mated that Braino should recover at least $500,000. Braino’s December 31, 2019, year-end financial statements were issued March 2, 2020. At that date, Braino still planned to file suit, even though it had not yet done so.
Required:
Next Level Discuss the accounting treatment in regard to the 2019 financial statements of Braino Tech called for by GAAP concerning the described circumstances. Be sure to conceptually justify this treatment.
2019 1.
A company must prepare an HGB financial statement as of December 31, t1. The company is legally obliged to clean up contaminated sites caused by 2.3.t1.This contaminated site remediation is to be carried out by a third-party company on 6.7.t2; You have received a cost estimate from the third-party company for this in the gross amount of EUR 357,000.a) Go into detail about the creation of provisions in the present case as of December 31, t1, and, if necessary, also state the posting. Assume that no provision was recognized for the facts stated in the balance sheet as of 12/31/t0!
b) Why is a provision and not a liability to be recognized under a)?c) On 6.7.t2 the third-party company will carry out the remediation of contaminated sites. The bill is presented on the same day in the amount of 357 T€ gross and you pay it immediately in cash. How to book?
Chapter 13 Solutions
Intermediate Accounting
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Prob. 1FSCCh. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
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- Q.1.3 During the previous financial year, a competitor began litigation against Isomin Ltd regarding a dispute over a design. On 10 April 2021, a judge decided that Isomin Ltd should pay the competitor R45 000 without leave to appeal. Isomin Ltd had treated this matter as a contingent liability in the 31 March 2020 financials. For each of the events described above, discuss whether an adjusting or non‐adjusting event occurred. In order to get the mark allocated you will need to justify why you believe the event is either an adjusting or non‐adjusting event.Where the events are adjusting, describe the adjustment that must be made as well as the amount and where the events are non‐adjusting, discuss whether any disclosure needs to be made in the notes to the financial statements. Justify your answers.arrow_forwardAccess the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ) Required: Determine the specific citation for accounting for each of the following items: 1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed. 2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities. 3. Accounting for the revenue from separately priced extended warranty contracts. 4. The criteria to determine if an employer must accrue a liability for vacation pay.arrow_forwardccess 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.arrow_forward
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