GAAP To IFRS
The decision of whether the loss is probable, reasonably possible or remote is made by the company’s attorney and it does not require a quantitative procedure. The disclosure made by both the company and the attorney or the auditor, about the contingencies losses, may be challenging to achieve. Our company depend on the judgment of its attorney to assess the potentiality of the losses. The auditor too, relies on the expertise of the attorney. However, the attorney cannot be held responsible for the disclosure or its inadequacy. It is the responsibility of our company to disclose all that GAAP stipulates, and not those of any other …show more content…
Its main objective is to ensure that the right criteria and assessment procedures are applied on contingent assets and liabilities. In addition, that adequate information is given through notes, so that the client or the financier gets sufficient clues on our company. The principle that is evident in this clause is that provision should only be provided where there is a liability. It makes sure that only the valid obligations are considered. But, any future liabilities, even if authorities sign them are not included in the financial statements.
However, IAS 37 excludes certain obligations including insurance contracts that is under IFRS 4 and financial instruments (IAS 39). To understand the treatment of disclosures in IFRS, we need to know a few terms. Provision means the present liability of an entity. Then there is a contingent liability including possible obligation based on whether unexpected event happens in the future. Present obligation that does not have a probable amount or whose amount cannot be estimated. There are also contingent assets, which refer to possible assets that may go up based on gain that is contingent on future, but it is not under the our company’s control. In order to recognize a provision, the present obligation must come from past information, the payment is probable and the amount can be estimated