9th Edition

ISBN: 9781259722660

Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher: McGraw-Hill Education

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Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Textbook Question

Chapter 13, Problem 13.19BYP

Real World Case 13–19

Contingencies

• LO13–5

Real World Financials

IFRS

Reporting requirements for contingent liabilities under IFRS differ somewhat from those under U.S. GAAP.

Required:

For each of the following, access the online version of the indicated financial report and answer the question. Also compare reporting under IFRS to similar reporting under U.S. GAAP.

1. AU Optronics (Form 20-F, filed 3/21/2016): Where there is a continuous range of possible outcomes, with each point in the range as likely as any other, what amount is accrued as the estimate of the obligation?

2. B Communications LTD (Form 20-F, filed 4/19/2016): With respect to legal claims, at what probability level would B Communications accrue a liability for a possible litigation loss?

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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Chapter 13, Problem 13.18BYP

Chapter 13, Problem 13.20BYP

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Solution Summary: The author explains how the IFRS is set up to bring a standard global language in accounting, so that other firms across the globe can understand the accounting term of all other businesses.

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