Reference no: EM132791765
Holmes Watson (HW) is considering what the effect would be of reporting its liabilities under IFRS rather than U.S. GAAP. The following facts apply:
a. HW is defending against a lawsuit and believes it is virtually certain to lose in court. If it loses the lawsuit, management estimates it will need to pay a range of damages that falls between $6,400,000 and $11,400,000, with each amount in that range equally likely.
b. HW is defending against another lawsuit that is identical to item (a), but the relevant losses will only occur far into the future. The present values of the endpoints of the range are $4,400,000 and $9,400,000, with the timing of cash flow somewhat uncertain. HW considers these effects of the time value of money to be material.
c. HW is defending against another lawsuit for which management believes HW has a slightly better than 50/50 chance of losing in court. If it loses the lawsuit, management estimates HW will need to pay a range of damages that falls between $4,400,000 and $10,400,000, with each amount in that range equally likely.
d. HW has $11,400,000 of short-term debt that it intends to refinance on a long-term basis. Soon after the balance sheet date, but before issuance of the financial statements, HW obtained the financing necessary to refinance the debt.
Required:
Problem 1. For each item, indicate how treatment of the amount would differ between U.S. GAAP and IFRS.
Problem 2. Consider the total effect of items a-d. If HW's goal is to show the lowest total liabilities, which set of standards, U.S. GAAP or IFRS, best helps it meet that goal?
|
Law of increasing opportunity costs
: According to economists, which of the following would explain why the above production possibilities curve is shaped as it is?
|
|
How income elasticity of demand can account for changes
: Explain how income elasticity of demand can account for changes in the different sectors of an economy as countries progress from less-developed countries throu
|
|
What are at least three ways that predictability
: What are at least three ways that predictability is emphasized in the higher education area?
|
|
Price determinant or a non-price determinant
: Based off of only the annual change in productivity data in Q1 answer the following question. Would the change in annual productivity impact
|
|
How treatment of the amount would differ US GAAP vs IFRS
: If HW's goal is to show the lowest total liabilities, which set of standards, U.S. GAAP or IFRS?How treatment of the amount would differ US GAAP vs IFRS
|
|
Apply the six characteristics of bureaucracy
: Apply the six characteristics of bureaucracy (hierarchy of offices, specialization, technical competence, impersonality, rules and regulations, formal written
|
|
Why is africana studies important in american education
: Why is Africana Studies important in American education and what do you bring to this course from your past experience?
|
|
Concern about poverty and income inequality
: There is growing concern about poverty and income inequality. These two concepts, however, are not the same.
|
|
Prepare the first-year journal entries for the bond issue
: Prepare the first-year journal entries for the bond issue and interest expense assuming that the company uses the effective interest method
|