Contingent liabilities
Below are three independent situations:
1. In August, 2020, a worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued his employer, Prince Corp., for $ 500,000. Prince's legal counsel believes it is possible that the outcome of the suit will be unfavourable and that the settlement would cost the company from $ 150,000 to $ 400,000.
2. On October 4, 2020, a lawsuit for breach of contract seeking damages of $ 2,400,000 was filed by an author against Queen Corp. Queen's legal counsel believes that an unfavourable outcome is more likely than not. A reliable measurement of the award to the plaintiff is between $ 600,000 and $ 1,800,000.
3. King Ltd. is involved in a pending court case. King's lawyers believe it is likely that King will be awarded damages of $ 700,000.
Instructions
Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers. Assume all companies involved use IFRS.

Question

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The Answer of Contingent liabilities
Below are three independent situations:
1. In August, 2020, a worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued his employer, Prince Corp., for $ 500,000. Prince's legal counsel believes it is possible that the outcome of the suit will be unfavourable and that the settlement would cost the company from $ 150,000 to $ 400,000.
2. On October 4, 2020, a lawsuit for breach of contract seeking damages of $ 2,400,000 was filed by an author against Queen Corp. Queen's legal counsel believes that an unfavourable outcome is more likely than not. A reliable measurement of the award to the plaintiff is between $ 600,000 and $ 1,800,000.
3. King Ltd. is involved in a pending court case. King's lawyers believe it is likely that King will be awarded damages of $ 700,000.
Instructions
Discuss the proper accounting treatment, including any required disclosures, for each situation. Give the rationale for your answers. Assume all companies involved use IFRS.

Contingent Liabilities Below Are Three Independent Situations