1. Describe the critical role of international perspectives in the application of accounting.

2. Discuss how differences in culture, the legal system, and the socio-economic environment impact the interpretation and analysis of financial information in different countries.

3. Improve your skills related to global financial information.

4. Discuss the need for the creation of uniform accounting standards of international application.

ABC Corp. is involved in various lawsuits regarding product liability, commercial liability, and other matters that arise from time to time in the ordinary course of business. The lawsuits pending at the beginning of the year and those filed in the current years are detailed below.

Pending Lawsuits at the Beginning of the year.

1. Product liability lawsuit related to XYZ, a pharmaceutical drug in which claimants seek substantial damages. ABCs attorneys assess the likelihood of losing the lawsuit (60%). At the beginning of the year, the estimated loss ranged from $500,000 to $1,500,000. At the end of the year, the attorneys assessment of the loss increased to a range between $750,000 and $2,000,000.

2. A personal injury lawsuit in which a claimant seeks substantial damages. ABCs attorneys assess the likelihood of losing the lawsuit as probable at 95%. At the beginning of the year, ABC reported a contingent liability of $750,000 for the lawsuit. At the end of the year, the attorneys assessment of the loss increased to a range between $900,000 and $3,000,000.

New Pending Lawsuits

3. A new product liability lawsuit was filed related to the drug xxx. ABCs attorneys assess the likelihood of losing the lawsuits as remote at 10%. The attorneys assessment of the loss increases to a range between $10,000,000 and $15,000,000.

4. A new product liability lawsuit was filed related to the drug yyy. ABCs attorneys assess the likelihood of losing the lawsuit as probable. The attorneys assessment of the loss increased to a range between $2,000,000 and $4,000,000.

Required:

Explain how each lawsuit is accounted for under IFRS. Assume ABC has a provision/contingent liability of $1,000,000 at the beginning of the year related to XYZ.