Question: (Learning Objective 1: Reporting a contingent liability) Roden Security Systems revenues for 20X0 totaled $6.3 million. As with most companies, Roden is a defendant in

(Learning Objective 1: Reporting a contingent liability) Roden Security Systems’

revenues for 20X0 totaled $6.3 million. As with most companies, Roden is a defendant in lawsuits related to its products. Note 14 of the Roden Annual Report for 20X0 explains the company’s policy on legal proceedings, stating that they will accrue for amounts related to legal matters if liability is probable and if it is reasonable to estimate an amount.

❙ Requirements 1. Suppose Roden’s lawyers believe that a signifi cant legal judgment against the company is reasonably possible. How should Roden report this situation in its fi nancial statements?

2. Suppose Roden’s lawyers believe it is probable that a $1.5 million judgment will be rendered against the company. Report this situation in Roden’s fi nancial statements.

Journalize any entry requirements by IFRS. Explanations are not required.

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