Case 21-2c Contingencies Product Recall Pharma-C Inc. (Pharma-C) develops and manufactures generic prescription drugs and over-the-counter medications. While Pharma-C is headquartered in the United States, its parent company is headquartered in Germany. During November 2020, Pharma-C distributed 10,000 bottles of its grape-flavored childrens cough medicine to various distributors and retailers. On December 31, 2020, Pharma-C discovered that 2,000 of the bottles were distributed with dosing cups that are missing the appropriate 5mL and 10mL graduations. Pharma-C is concerned that the use of the incorrect dosing cups could result in dangerous overdoses to children. There are no laws or regulations requiring Pharma-C to recall the childrens cough medicine because of the incorrect dosing cups. In addition, there have been no consumer lawsuits brought against Pharma-C for the distributed bottles. Because of the potential risk to children associated with the mislabeled dosing cups, Pharma-C decided to voluntarily recall the childrens cough medicine. On January 2, 2021, Pharma-C announced the recall of the affected bottles, which is estimated to cost Pharma-C $10,000.

Discussion: In its financial statements for the year ended December 31, 2020, how should Pharma-C account for the voluntary product recall under (1) U.S. GAAP and (2) IFRS in reporting to its parent company in Germany?

Please specify the accounting method needed under gaap and ifrs. Please include information about the consolidation of the sub to its parent in Germany.