Ifrss Reprting

INTERAMERICAN UNIVERSITY OF PUERTO RICO

METRO CAMPUS

LUIS VISALDEN REYES

M00258797

PROF. ALEJANDRO MENDEZ

ACCOUNTING SEMINAR

Provision and Contingencies

Case 2: Case 12-03

Scenario 1

Energy Inc. (Energy) operates in the oil industry, is a U.S. subsidiary of a U.K. entity that prepares its financial statements in accordance with:

1. IFRSS in reporting to its present and

2. U.S. GAAP for reporting to its U.S. based lender

Energy’s operation sometimes results in oil contamination. It cleans up this contamination when required to do under the laws of the particular country in which it operates. One country in which it operates has no legislation requiring clean up.

* Energy has inadvertently contaminated land in that country in prior years.

* As of December 31, 2011, it is virtually certain that a draft law requiring a clean-up of land already contaminated will be enacted, but not until shortly after the year-ended.

Required:

Should Energy recognize a provision as of December 31, 2011?

1. In reporting to its U.K. parents under IFRSs and

2. In reporting to its U.S. based lender under in accordance with U.S. GAAP?

Scenario 2

FuelSorce Co. (FuelSource) is a U.S. subsidiary of a U.K. entity that prepares its financial statements in accordance with:

1. IFRSS in reporting to its present and

2. U.S. GAAP for reporting to its U.S. based lender

FuelSource also operates in the oil industry and its operation sometimes results in soil contamination.

* FuelSource operates in Dirty Country where there is no environmental legislation.

* However, FuelSource has widely published environmental policy in which it undertakes to clean up all contamination that it causes.

* FuelSource has a record of honoring this published policy.

The U.K. parents also has a widely published environmental policy in which it undertakes to clean up all contamination it causes and has a record of honoring this published policy....