SSAP 5

Question 1

3 components of liabilities:

Answer 1

1. present responsibility to transfer/ use assets at a specified/ determinable date based on the occurrence of a specified event/ on demand
2. The entity has little/ no discretion to avoid the responsibility
3. The transaction/ event that obligates the entity has already occurred

Question 2

Define “loss contingency”/ “asset impairment”:

Answer 2

An existing condition involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur

Question 3

2 necessary criteria to charge a loss contingency/ asset impairment to operations:

Answer 3

1. Information prior to the issuance of the financial statements indicates that the assets has been impaired/ liability incurred at the date of the financial statements
2. The amount of the loss can be reasonably estimated

Question 4

How should management book the reserve if there is a range:

Answer 4

• if a particular amount within the range appears to be a better estimate, that amount should be booked
• if no amount in the range appears to be better than the others, the midpoint should be booked

Question 5

How should management book the reserve if there is no range:

Answer 5

the best estimate should be booked

Question 6

Criteria to make a disclosure about loss contingency/ asset impairment:

Answer 6

• a contingency/ asset impairment is not recorded because only one of the two conditions is met
• there is an exposure to loss higher than the amount accrued

Question 7

2 disclosures that need to be made regarding loss contingency/ asset impairment:

Answer 7

1. nature of the contingency

2. estimate of the possible loss/ range of loss; or a statement that such an estimate can not be made

Question 8

Disclosures that need to be made for each joint & several liability arrangement:

Answer 8

• Nature of the agreement
• Total outstanding amount under the arrangement
• Carrying amount of the insurers liability, and carrying amount of the receivable recognized
• Nature of any recourse provisions that would enable recovery from other entities of the amounts paid, including any limitations on the amounts that may be recovered
• In the period where the liability was initially recognized & measured, or the period in which the measurement changes significantly: the corresponding entry/ where the entry was recorded in the financials