9.4 Account for contingent liabilities and provisions
1) Contingent liabilities represent actual and not potential obligations.
2) There are times when contingent liabilities are never recorded.
3) Disclosure is required under IFRS when the likelihood of the outcome (measurement) is:
A) virtually certain: > 95%.
B) possible: 5% - 50%.
C) remote:
D) probable: 50% - 95%.
E) likely: 70% - 95%.
4) Which of the following would be considered a contingent liability?
A) Sales tax obligation
B) Mortgage obligation
C) Accounts payable obligation
D) Pending legal action
E) Notes obligation
5) When the likelihood of an obligation occurring is possible, under Canadian ASPE what is the accounting treatment?
6) Under IFRS, a __________ is a liability that has an uncertain timing or an uncertain amount.
7) When the likelihood of an obligation occurring is virtually certain, what is the accounting treatment under IFRS and Canadian ASPE?
8) Tim Hortons is a public company and prepares its financial statements in accordance to IFRS. The company has a contingent liability estimated at $232,000. The likelihood of the obligation occurring is remote or
9) Amanda Industries, a private company, has a contingent liability estimated at $125,000 with a 70%-95% likelihood of the obligation occurring What is the appropriate accounting treatment for the company?