Note: For all scenarios, support your answers with citations from the authoritative IFRS and U.S. GAAP literature.

Scenario 3

The government introduces a number of changes to the income tax system. As a result of these changes, Energy will need to retrain a large proportion of its administrative and sales workforce to ensure continued compliance with the new regulations. As of the balance sheet date, no retraining of staff has taken place.

Required:

Should Energy recognize, as of the balance sheet date, a provision for the expected costs to retrain the staff (1) in reporting to its U.K. parent under IFRS and (2) in reporting to its U.S.-based lender in accordance with U.S. GAAP?