Question

A customer of Razor Sharpeners alleges that Razor's new razor sharpener had a defect that resulted in serious injury to the customer. Razor believes the customer has a 51% chance of winning the case, and that if the customer wins the case, there is a range of losses of between $1,000,000 and $3,000,000 in which any number is equally likely to occur. Under IFRS, Razor should accrue a liability in the amount of

Answer 1

Razor should accrue a liability in the amount of $0.

Step-by-step explanation:

If the likelihood are likely and the quantity can be calculated with satisfactory precision, a contingent liability is to be accumulated. The amount cannot be calculated with reasonable precision in the given situation so no liability is to be acknowledged. Therefore Razor should accrue a liability in the amount of $0.