Evade Company Essay

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Akhmad Yusuf ACCT 351 Research Case 1 1. As of December 31, 2011, what amount, if any, of sales due should be recognized in eVade’s financial statements? According to FASB ASC 450-20-25-2, in order to recognized a loss contingency, two of the following conditions have to be met; information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and the amount of loss can reasonably be estimated. Since eVade considers the risk of detection to not be probable, there is no need to make any provision as of December 31, 2011. However, a suitable disclosure has to be made…show more content…
Would your answer to the question 1, 2, and 3 change under IFRS? Explain your answer supported by the references from IFRSs. No, there will be no change to answer question 1-3 under IFRS. Referring to question 1, under IAS 37, para. 29-30, the provision cannot be measured reliably and does not qualify for recognition. Therefore, eVade does not need to make any provisions as of December 31, 2011. However, eVade must record the loss contingencies in its financial statement in the amount of $60 million dollars. As for question 2 above under FASB, eVade company will still need to record a liability of $25 million dollars in its financial statement under IFRS as well. (IAS 08, para. 39). References for FASB ASC ASC 450-20-25-2 An estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met: * a. Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss. * * b. The amount of loss can be reasonably
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