Reference no: EM132569652
Question - Below are three independent situations.
1. In August, 2011 a worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued his employer, Simon Corp, for $800,000. Simon's legal counsel believes it is possible that the outcome of the suit will be unfavourable and that the settlement would cost the company from $250,000 to $500,000.
2. A suit for breach of contract seeking damages of $1,200,000 was filed by an author against Eller Co. on October 4, 2011. Eller's legal counsel believes that an unfavourable outcome is more likely than not. A reasonable estimate of the award to the plaintiff is between $300,000 and $900,000. No amount within this range is a better estimate of potential damages than any other amount.
3. Pratt is involved in a pending court case. Pratt's lawyers believe it is likely that Pratt will be awarded damages of $1,500,000.
Required - For each independent situation above, discuss the proper accounting treatment, including any required disclosures for the situation. Give the rationale for your answers. Assume all companies involved use IFRS.
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