Economics · Accounting
According to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), identify the correct accounting treatment for each of the following four independent scenarios for the year ended 31 December 20X5: 1. A legal claim against the company has a 30% chance of success according to lawyers. 2. The company has a well-publicized policy of offering full refunds to dissatisfied customers. 3. A customer has sued for $200,000; lawyers say it is probable the company will lose, but the exact amount is uncertain. 4. A potential claim exists for an incident after the year-end, which is considered possible.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11- Disclose Contingent Liability, 2- No Action Required, 3- Recognize Provision, 4- No Action Required
- 21- Disclose Contingent Liability, 2- Recognize Provision, 3- Recognize Provision, 4- No Action Required✓
- 31- Disclose Contingent Liability, 2- Disclose Contingent Liability, 3- Recognize Provision, 4- No Action Required
- 41- Recognize Provision, 2- No Action Required, 3- Recognize Provision, 4- No Action Required
Correct answer
1- Disclose Contingent Liability, 2- Recognize Provision, 3- Recognize Provision, 4- No Action Required
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