HolmesWatson $(HW)$ is considering what the effect would be of reporting its liabilities under IFRS

rather than U$.$S$.$ GAAP. The following facts apply:

a$.$ HW is defending against a lawsuit and believes it is virtually certain to lose in court. If it loses the

lawsuit, management estimates it will need to pay a range of damages that falls between

$$5,000,000$ and $$10,000,000,$ with each amount in that range equally likely.

b$.$ HW is defending against another lawsuit that is identical to item $($a$),$ but the relevant losses will

only occur far into the future. The present values of the endpoints of the range are $$3,000,000$

and $$8,000,000,$ with the timing of cash flow somewhat uncertain. HW considers these effects of

the time value of money to be material.

c$.$ HW is defending against another lawsuit for which management believes HW has a slightly better

than $50/50$ chance of losing in court. If it loses the lawsuit, management estimates HW will need

to pay a range of damages that falls between $$3,000,000$ and $$9,000,000,$ with each amount in

that range equally likely.

d$.$ HW has $$10,000,000$ of short$-$term debt that it intends to refinance on a long$-$term basis. Soon

after the balance sheet date, but before issuance of the financial statements, HW obtained the

financing necessary to refinance the debt.

Required:

For each item, indicate how treatment of the amount would differ between U$.$S$.$ GAAP and IFRS.

Consider the total effect of items a$-$d$.$ If HW$\text{'}$s goal is to show the lowest total liabilities, which set

of standards, U$.$S$.$ GAAP or IFRS, best helps it meet that goal?