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Does smokey have a liability to install filters at that time

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Reference no: EM132868557

Question - Applying the Definition of a Liability Situation #1 (FASB Discussion Case) Smokey operates a factory in a jurisdiction that enacted legislation requiring smoke filters for all factories. The legislation, enacted in October, 2020 requires installation of the filters by December 31, 2021. A failure to meet the requirement will trigger a material fine assessed annually. The fine does not remove Smokey's obligation to install filters. As of December 31, 2020 Smokey has not installed filters.

1. On December 31, 2020 does Smokey have a liability? Suppose Smokey asserts the company will never install the filters. Does this change anything?

2. If by December 31, 2021 Smokey has not installed filters, does Smokey have a liability to install filters at that time?

3. If Smokey has not installed the filters and has a liability on December 31, 2021, is it only for the current year or for more than one year? Assume Smokey continues to assert it will never install the filters.

Reference no: EM132868557

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