Boreal Bikes reports under IFRS. Counsel judges a loss on a product claim more likely than not, with damages equally likely anywhere between 100,000 and 300,000 and no single best estimate. Record the provision.
Boreal Bikes reports under IFRS. Counsel judges a loss on a product claim more likely than not, with damages equally likely anywhere between 100,000 and 300,000 and no single best estimate. Record the provision.
Answer
Dr Legal Expense 200000; Cr Provision for Lawsuit 200000
Accounts - Legal Expense - Provision for Lawsuit - Cash - Retained Earnings - Contingent Liability - Accounts Payable IAS 37 measures a continuous range with no best estimate at its midpoint: (100,000 + 300,000) ÷ 2 = 200,000. Debit the expense, credit a provision. The traps are 100,000 (ASPE’s lowest-in-range rule) and 300,000 (the top of the range, which neither framework uses); “Contingent Liability” is never an account.
L2 §12.6–12.7, §12.9; IAS 37 ¶14, ¶23, ¶39; ASPE Section 3290 (cited without paragraph numbers — verified-facts 2.5-8)