Contingency

Question 1

If there is contingent gain in a arrange, how much to record?

Answer 1

Disclose the gain of a range for the undetermined amt

Remember: gain only disclose, no record of any amt

Question 2

When a self insured company retain RE for premium payment less recognized losses from classified events, when that event happened, how to record the expense?

Answer 2

Expense xx
Liability. Xx

Even though the amount is out of RE, the company won’t have insurance coverage, so the liability is contingent when things happened.

Question 3

Characteristics of servicing financial assets

Answer 3

1. Servicing function is inherent for all financial asset.
2. The right to service financial assets can result in either a separate asset or liability
3. If a servicing assets is acquired in market, record at FV.

Question 4

When become guarantor for someone, the party ended up default on the payment, the possible liability is in a range, what is the possible contingent liability for the guarantor?

Answer 4

Same as others, choose the lowest amt, following the conservatism principle

Question 5

IFRS contingency differences with GAAP

Answer 5

If greater than 50% (reasonably possible) chance of liability, and amount is estimable, IFRS count it is as recognized liability

Both GAAP and IFRS all recognize contingent liability when s possible obligation that require a future event for confirmation.

Question 6

Under IFRS, if the liability is in a range, what to record as contingent liability?

Answer 6

Do the average