Question: Three independent situations follow Situation 1 A company offers a one year warranty

Three independent situations follow.
Situation 1
A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled and the probable amount of claims on sales for any particular period can be determined.
Situation 2
Subsequent to the date of a set of financial statements, but before the date of authorization for issuing the financial statements, a company enters into a contract that will probably result in a significant loss to the company. The loss amount can be reasonably estimated.
Situation 3
A company has adopted a policy of recording self-insurance for any possible losses resulting from injury to others by the company’s vehicles. The premium for an insurance policy for the same risk from an independent insurance company would have an annual cost of $4,000. During the period covered by the financial statements, there were no accidents involving the company’s vehicles that resulted in injury to others.
Discuss the accrual or type of disclosure that is necessary under ASPE (if any) and the reason(s) why the disclosure is appropriate for each of the three independent situations.
(AICPA adapted)

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  • CreatedAugust 23, 2015
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