Answered: Discuss the following terms used in…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 8MC

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Question

Discuss the following terms used in MFRS 108 Accounting Policies, Changes
in Accounting Estimates and Errors, and MFRS 137 Provisions, Contingent
Liabilities and Contingent Assets. Provide brief examples to support the
discussion:

i)Retrospective method

ii)Prospective method

iii)Contingent assets

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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