Question 10-7

es. BE10-6 For each of the following independent situations, indicate whether it should be (1) recorded, (2) disclosed, or (3) neither recorded nor disclosed. Explain your reasoning and indicate if the accounting treatment would be the same or different under IFRS and ASPE. (a) A customer has sued a company for $1 million. Currently the company is unable to determine if it will win or lose the lawsuit. (b) A customer has sued a company for $1 million. The company will likely lose the lawsuit. (c) A competitor has sued a company for \$2 million. The lawyers have advised that there is a 55\% chance that the company will lose the lawsuit. (d) A company has guaranteed a $300,000 loan for one of its key suppliers. The supplier has a good credit rating and is not expected to default on the loan. BE10-7 Athabasca Toil \& Oil Company, a public company, is a defendant in a lawsuit for improper discharge of pollutants and waste into the Athabasca River. Athabasca's lawyers have advised that it is probable the company will lose this lawsuit and that it could settle out of court for $50,000. Should Athabasca record anything with regard to this lawsuit? Or should it disclose it in the notes to the financial statements? Explain. BE10-8 Identify which of the following items should be classified as a current liability. For those that are not current liabilities, identify where they should be classified. (a) A product warranty (b) Cash received in advance for airline tickets