Provisions And Contingencies
Under IFRSs IAS 37, a provision is recognized for a legal or constructive obligation arising from a past event, if there is a probable (more likely than not) outflow of resources and the amount can be estimated reliably (IAS 37.14). In contrast, according to FASB ASC 450-20-25-2, a contingency (provision) is recognized if it is probable (likely) that a liability has been incurred and the amount is reasonably estimated.
Scenario 1
(1) Under IFRSs: According to IAS 37.22, the contamination of the land gives rise to a legal obligation for Energy because it is virtually certain the legislation that requires cleanup will be enacted. Also, it is probable that an outflow of resources will be required. Thus, a provision is recognized for the best estimate of the costs of the cleanup. (2) Under US GAAP: In the context of environmental remediation liabilities, it is probable that a liability has been incurred if an assessment related to a environment law has been asserted on or before the financial statements are issued and it is probable that the outcome will be unfavorable (FASB ASC 410-30-25-4). It is virtually certain that the draft law that requires cleanup will be enacted shortly after the year-end. Thus, a liability/contingency is recognized for the reasonably estimate the cleanup costs.
Scenario 2
(1) Under IFRSs: The land contamination gives rise to a constructive obligation because the conduct of the entity has created a valid expectation in other parties that the entity will clean up the contamination (IAS 37.17). Also, it is probable that payments are required. Thus, a provision is recognized for the best estimate of the cleanup costs.
(2) Under US GAAP: An environmental remediation liability should be recognized if an entity is a potentially responsible party to clean up the contamination and the entity has a record to determine that it is associated with the site (ASC 410-30-25-15). Thus, a liability/contingency is recognized for the best estimate of the
Scenario 1
(1) Under IFRSs: According to IAS 37.22, the contamination of the land gives rise to a legal obligation for Energy because it is virtually certain the legislation that requires cleanup will be enacted. Also, it is probable that an outflow of resources will be required. Thus, a provision is recognized for the best estimate of the costs of the cleanup. (2) Under US GAAP: In the context of environmental remediation liabilities, it is probable that a liability has been incurred if an assessment related to a environment law has been asserted on or before the financial statements are issued and it is probable that the outcome will be unfavorable (FASB ASC 410-30-25-4). It is virtually certain that the draft law that requires cleanup will be enacted shortly after the year-end. Thus, a liability/contingency is recognized for the reasonably estimate the cleanup costs.
Scenario 2
(1) Under IFRSs: The land contamination gives rise to a constructive obligation because the conduct of the entity has created a valid expectation in other parties that the entity will clean up the contamination (IAS 37.17). Also, it is probable that payments are required. Thus, a provision is recognized for the best estimate of the cleanup costs.
(2) Under US GAAP: An environmental remediation liability should be recognized if an entity is a potentially responsible party to clean up the contamination and the entity has a record to determine that it is associated with the site (ASC 410-30-25-15). Thus, a liability/contingency is recognized for the best estimate of the