Ch. 12 - Contingencies

Question 1

Contingent Liability Vs. Provisions

Answer 1

1. Contingent Liabilities: don’t meet recognition criteria

2. Provisions: meet the recognition criteria

Question 2

Provision Recognition Criteria:

Answer 2

1. a present obligation arising from a past event
2. its probable the entity will have an outflow of economic resources
3. a reliable estimate can be made

Question 3

Provision Recognition Criteria - Probability range

Answer 3

1. Remote
2. Possible
3. Probable

Question 4

Provision Recognition Criteria - Probability range (Remote)

Answer 4

1. there is a low probability

Question 5

Provision Recognition Criteria - Probability range (Possible)

Answer 5

not remote, nor probable

Question 6

Provision Recognition Criteria - Probability range (Probable)

Answer 6

If the event is more likely than not to occur

Question 7

Provisions, Contingent Liabilities and Contingent Asset - IAS #

Answer 7

37

Question 8

Recognition Measurement - options

Answer 8

1. most likely (for one most likely outcome)

2. weighted average (for multiple likely outcomes)

Question 9

Disclosure for Provisions

Answer 9

1. Nature, timing and uncertainty
2. amount of expected reimbursements
3. carrying amount at beginning and end of period
4. changes in amount over the year

Question 10

Do not record, but disclose when (2 scenarios):

Answer 10

1. the outflow is possible, but not probable

2. when probable, but no estimate can be made

Question 11

Do not record or disclose when:

Answer 11

1. when the contingent liability is remote

Question 12

Contingent Assets - recognition

Answer 12

1. If virtually certain, record
2. If probable, can be disclosed but not recorded
3. If less than probable, no disclosure

Question 13

ASPE - naming difference

Answer 13

1. ASPE calls it a contingent loss, while IFRS calls it a provision
2. ASPE calls it a contingent gain while IFRS calls it a contingent asset

Question 14

ASPE - Recognition Criteria

Answer 14

1. It is likely there will be an outflow of economic resources
2. A reliable estimate can be made
3. The liability is a result of a past event

Question 15

ASPE - Amount to record

Answer 15

1. When there are multiple likely outcomes, ASPE records the lowest one, while IFRS uses the weighted average
2. If one most likely outcome, use the most likely

Question 16

ASPE Disclosures

Answer 16

1. nature of the contingency
2. an estimate of the contingent loss or that an estimate cannot be made
3. any exposure to loss greater than the accrued amount

Question 17

ASPE - Criteria to record a contingent gain

Answer 17

1. must be 100% probable (certain)
2. If only probable, disclose
   a) nature of the contingency
   b) an estimate of the gain or that the gain cannot be estimated