ASPE and IFRS have differing criteria for whether an element should be recognized or not. Assume that Thatcher Inc. (TI) is the subject of a lawsuit. TI sells prepared food on a wholesale basis to supermarket chains (which resell the food at a retail level). The food is perishable and must be kept refrigerated. Recently, a customer purchased some of the food from a local supermarket and then was very ill. They have sued TI and the supermarket. The lawsuit has just been launched and has yet to go to court. It is unclear whether the food was tainted when it was sold to the supermarket or whether the supermarket failed to keep the food properly refrigerated before it was sold. TI has spoken with its lawyers and determined that there is more than a low probability that TI is at fault but is not sure at this point whether it is probable that it will lose the lawsuit.

Instructions
Using only the conceptual frameworks (and not other specific GAAP), complete the items below.

a. List the recognition criteria under ASPE and IFRS, noting how they differ.

b. Identify the three essential characteristics of a liability (the definition of a liability).

c. Discuss the terms “existence uncertainty,” “outcome uncertainty,” and “measurement uncertainty” as they relate to the recognition criteria.

d. Apply the recognition criteria under both ASPE and IFRS to the lawsuit.