Which of the following statements is correct?
A)Under IFRS, content gains should be recognized if they are reasonably certain to occur.
B)A contingency is more likely to require an accrual than a provision.
C)Under IFRS, contingencies may be accrued, but not under ASPE.
D)Litigation for which the company will probably be found guilty would normally be accrued as a provision.

Question

Quizplus · Accepted Answer

Under IFRS, a provision (which includes litigation where the company is likely to be found guilty) should be recognized when: (1) the company has a present obligation as a result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made of the amount of the obligation. This is why litigation that is likely to result in a loss for the company is accrued as a provision.

Which of the Following Statements Is Correct