1. In 2010, Maverick Inc. became involved in a tax dispute with the IRS. Maverick's attorneys have indicated that they believe it is probable that Maverick will lose this dispute. They also believe that Maverick will have to pay the IRS between $800,000 and $1,400,000. After the 2010 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2010?

2. On October 1, 2015, Holmgren Chemical was identified as a potentially responsible party by its Environmental Regulatory Agency. Holmgren's management along with its counsel have concluded that it is probable that Holmgren will be responsible for damages, and a reasonable estimate of these damages is euro6,000,000. Holmgren's insurance policy of euro9,000,000 has a deductible clause of euro500,000. How should Holmgren Chemical report this information in its financial statements on December 31, 2015? 

3. Shinobi Inc. had a manufacturing plant in Darfur, which was destroyed in the civil war. It is not certain who will compensate Shinobi for this destruction, but Shinobi has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant but more than its book value. How should the compensation be reported in the financial statements of Shinobi Inc.? 

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1 a In Australia the AASB accounting standards apply which are supported international accounting st... View the full answer