With regard to reporting contingent liabilities on a balance sheet,financial statements prepared under International Financial Reporting Standards (IFRS)will:
A)Have fewer contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a higher percentage than the U.S.GAAP guideline for "probable".
B)Have more contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a lower percentage than the U.S.GAAP guideline for "probable".
C)Have more contingent liabilities accrued than under U.S.GAAP because IFRS requires all lawsuits,environmental problems,and product warranties that are reasonably estimable to be accrued while U.S.GAAP requires accrual only if losses are reasonably possible of being incurred.
D)Have fewer contingent liabilities accrued than under U.S.GAAP because IFRS requires a more subjective evaluation of the probability of occurrence than does U.S.GAAP.

Question

Quizplus · Accepted Answer

Under IFRS, "probable" is interpreted as more likely than not, which is generally considered to be a lower threshold than the "probable" threshold under U.S. GAAP. This results in more contingent liabilities being recognized under IFRS.

With Regard to Reporting Contingent Liabilities on a Balance Sheet,financial