At December 31, 2015, Layla’s Design Company received legaladvice from an outside advisor that it was 75% probable that thecompany would be found liable in a lawsuit related to fabric usedin a spring 2014 dress collection. A range of damages in the amountof $250,000 to $300,000 was equally likely. Under U.S. GAAP, shouldLayla’s Design Company recognize a provision for damages? If so,please record the journal entry below.
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Description of the journalentry:__________________________________________________________
Would your answer be different under IFRS? YES NO (circleone)
If yes, what would be the journal entry?
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Please explain how a decline in probability from 75% to 60%would make a difference in your analysis.______________________________________________________________________________________________________________________________________________________________________________
