A lawsuit has been filed against XYZ Company. As year-end, the companys attorney believes that there is
Question:
A lawsuit has been filed against XYZ Company. As year-end, the company’s attorney believes that there is an 85% likelihood that the company will be found liable. The attorney believes that the estimated range of the liability is between $50,000 and $150,000 and that all amounts within the range are equally likely. In addition, the company has announced a restructuring plan prior to year-end that has created a valid expectation on the part of the employees to be terminated with an estimated liability of $500,000. As of year-end, there is currently no legal obligation to make any payments to the terminated employees. Lastly, the Company issued stock options with a fair value of $200,000 on January 1st with a 2 year vesting schedule.
- What would be the amount, if any, that XYZ would record on the balance sheet related to the lawsuit under IFRS and US GAAP?
- What would be the amount, if any, that XYZ would record on the balance sheet related to the restructuring under IFRS and US GAAP?
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen