ChemX Inc, a chemical company, found out one week before its fiscal year end 12/31/X1 that its branch leaked significant amount of mercury (above safety level) at a plant site in Country A that requires a chemical company to buy and install specialized equipment (costing $500,000) to prevent mercury leakage. Country A also has legislation that requires a company to clean up mercury contamination.

As of 12/31/X1, ChemX has not bought and installed the specialized equipment, and there has been no allegation against ChemX regarding the mercury leakage. ChemX estimated that there is about 70% probability that it will be subject to an enforcement action by Country As environmental authority. ChemX incurred $1 million to clean up a similar mercury contamination at its plant site in another nearby country last year.

Required:

Answer using both IFRS and U.S. GAAP.

Also state if ChemX should provide footnote disclosure under IFRS and U.S.GAAP. Why or why not? If it should, discuss information that should be disclosed

Question: If Country A has NO legislation that requires a company to clean up mercury contamination; and if ChemX has widely publicized a policy to clean up all contamination sites that it causes, and has been honoring this policy, as of 12/31/X1

Is ChemX required to recognize a liability relating to the clean up? Why?