Chapter 13, Problem 1BCC

Scene1.

To determine

The reasons which makes the provision different from the other types of current liabilities reported on a company’s balance sheet.

Scene2.

To determine

The way in which a provision under IFRS and a contingency under U.S GAAP differ.

To determine

The reason that makes provisions to be separately identified rather than being included with other accrued liability.

Scene3.

To determine

The probabilities assigned to each category under U.S GAAP and IFRS.

To determine

The reason why the probabilities are not used in the standards rather than the expressions that are subject to interpretation.

To determine

Whether the guidance provided for loss contingencies under U.S GAAP to be rules based or not and is IFRS more principle based than the U.S GAAP guidance.

Scene 4.

To determine

The comparison between the view regarding loss contingency and if one view is more liberal than the other.

Scene 5.

To determine

The standard under which there is more disclosure in the financial statements.

Scene 6.

To determine

Whether the concept of ‘conservatism’ be considered while determining a contingency.

To determine

Whether the standards at odds with the concept of conservatism because they do not require contingent liabilities to be recognized unless they are probable and can be estimated or not.

To determine

Whether the concept of conservatism is a guiding principle for developing accounting standards or not.