A Foreign Subsidiary of a U

question 45

Multiple Choice

A foreign subsidiary of a U.S.-based company has been notified of a loss contingency with an estimated cost ranging between $250,000 and $275,000 which is probable of resulting in an actual loss. Each dollar amount within this range of cost is equally likely of being the actual outcome.According to IFRS, what is the amount recognized as a provision for loss contingency?

• A) No amount will be recorded but an amount will be disclosed in the notes to the financial statements.
• B) $25,000
• C) $275,000
• D) $262,500
• E) $250,000

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Definitions:

Third-Party Check

A check made payable to one party and then endorsed to another as a payment method.

Deposit Record

A record of a financial deposit that is given by the bank to the customer at the time of the deposit.

Endorsement

A formal declaration of support or approval.

Pin Pad

A device used in electronic transaction systems to input a personal identification number or other secure data.