Asked Jan 27, 2020

How do U.S. GAAP and IFRS differ in their use of present values when measuring contingent liabilities?


Expert Answer

Step 1

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability.   Following are examples of contingencies:

  • Income tax disputes
  • Discounted notes receivable
  • Lawsuits
  • Debt guarantees
Step 2

Determine the difference in the use of present values when contingent liabilities are measured.

When International Financial Reporting Standards (IFRS) are considered, the present values need...

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