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IFRS-CH13-Solution - IFRS Practice Problem CH 13 Under IFRS...

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IFRS – Practice Problem – CH. 13 Under IFRS, the $70 million environmental contingency would be accrued and included in Hizer’s liabilities. The associated loss would be reported in the income statement. Accounting for contingencies is covered under IAS No.37, “Provisions, Contingent Liabilities and Contingent Assets.” US GAAP provides specific guidance on contingencies in SFAS No. 5, “Accounting for Contingencies.” A difference in accounting relates to determining the existence of a loss contingency. We accrue a loss contingency under U.S. GAAP if it’s both probable and can be reasonably estimated. IFRS is similar, but the threshold is “more likely than not.” This is anything higher than 50%, a lower threshold than “probable.” Under IFRS, Hizer’s bonds would have been reported as current
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