If the Likelihood of a Future Event Is Probable and the Amount

question 24

Essay

If the likelihood of a future event is probable and the amount of the expense can be estimated,how should the company report the contingency?

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Definitions:

Provision

A liability of uncertain timing or amount, recognized when an entity has a legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation.

Discreet Approach

A method or strategy that is conducted with subtlety and reserve, often to avoid attracting undue attention or to handle sensitive matters.

Integral Approach

An accounting method that combines the financial statements of a parent company and its subsidiaries into one comprehensive set of statements.

Pre-tax Interim Net Income

The net income earned before taxes are deducted during an interim period, such as a quarter or half-year.