Below is my answer to the question, please help me check if I did it correctly.(especially Nr.C)

The following selected circumstances relate to pending lawsuits for Erismus, Inc, and American company. The company is considering what the effect would be of reporting its liabilities under IFRS and U.S.GAAP. The following facts apply:

a. Erismus is defending against a lawsuit. Erismuss management believes the probability of losing the case is slightly higher than 50%, and that if the company loses, the judgment will be a $1,000,000 fine.

b. Erismus is defending against a lawsuit. Erismuss management believes it is probable that the company will lose in court. If it loses, management believes that damages could fall anywhere in the range of $2,000,000 to $4,000,000, with any damage in that range equally likely.

c. Erismus is defending against a lawsuit. Erismuss management believes it is probable that the company will lose in court. If it loses, management believes that damages will eventually be $5,000,000 (to be paid in 3 years), with a present value of $3,500,000.

For each item, indicate how treatment of the amount would differ, if any, between U.S. GAAP and IFRS.

Solution:

	U.S.GAAP		IFRS
a.	do not accrue liability		accrue liability	$1,000,000
b.	accrue liability	$2,000,000	accrue liability	$3,000,000
c.	accrue liability	$5,000,000??	accrue liability	$3,500,000
	Total liability	$7,000,000		$7,500,000