1. Chapter 11 Contingency

2. Contingent 1.concept: past transactions or events of a situation, the results by the occurrence of uncertain future events occur or not be confirmed. 2.feature: the formation of the past, present uncertain future confirmed.

3. (1) transactions or events from the past, is the existing situation or a matter of past transactions or events caused by the objective. (2) the result is uncertain, is whether the outcome of the matter or the occurrence of uncertainty, or expected outcome of the matter or will occur, but the specific time or place the amount of uncertainty (3) matters decided by the future, is the outcome of the matter or only by the occurrence of uncertain future events or non-occurrence can be determined.

4. 3. Probability: the likelihood of the results the corresponding probability interval  Sure 95% ＜ 100%  Probably 50% ＜ 95%  Maybe 5% ＜ 50%  Minimum possible 0 ＜ 5%

5. Common contingency  Pending litigation or pending arbitration  Debt guarantees  Product quality assurance (including product safety assurance)  Commitment  Loss of contract  Restructuring obligations  Environmental remediation

6. Forms of contingency  As a matter or situation, the enterprise may be a potential rights, but also may be a real or potential obligations. The specific form of the following three:  Potential rights——contingent asset  Potential obligations——contingent liability  Real obligation——Accrued liabilities

7. Contingent liability  The concept of contingent liability Refers to past transactions or events of potential assets, there must by its uncertain future occurrence or non- occurrence to be confirmed.  The feature of contingent liability Transactions or events from the past generation. Results (that is, whether the formation of corporate real asset) is uncertain. Results required by the occurrence of future events occur or not can be confirmed.  The principles of contingent liability Based on considerations of prudence, or the possibility of realizing how both assets are not recognized.

8. Contingent liability  The concept of contingent liability  Refers to past transactions or events of potential Or assets, there must by its uncertain future occurrence or non-occurrence to be confirmed.  The feature of contingent liability  Generated by the past transactions or events.  Results (that is, whether the formation of corporate real asset) is uncertain.  Results required by the occurrence of future events occur or not can be confirmed.  The type of contingent liability  asset management principles  Based on considerations of prudence, or  the possibility of realizing how both Or assets are not recognized. How to determine? Conceptually ， what is theDifferences and similarities between liability and contigency liability

9. Accrued liabilities Conditions: the current obligations, it is possible, a reliable measurement  (1) the obligation is a present obligation of enterprises. No other realistic option companies can only fulfill this obligation, such as the law requires business imperative, the parties should reasonably be expected to perform other companies.  (2) the obligation is likely to lead to an outflow of economic benefits, usually refers to the performance issues associated with current obligations, leading to the possibility of outflow of economic benefits over 50%.  (3) the amount of the obligation can be reliably measured.

10. Determine the best estimate  There is a continuous range of expenditure required, and the range of results likelihood of the same. The best estimate should be in accordance with the midpoint of the range determined  Other cases: or involves a single project, the amount determined according to the most likely to occur. involves several items, according to various possible outcomes and associated probabilities calculation.  Determine the best estimate should pay attention to the problem  Matters related to risk and uncertainty  Time value of money  Related to the impact of future events  Related to the disposal Or assets should not be considered to form the expected profits

11. Process of the expected to receive compensation  Basic principles  Corporate debt is expected to settle all or part of the expenditure required compensation by a third party, basically determine the amount of compensation can only be received as an asset separately recognized  Confirm the amount of compensation should not exceed the book value of projected liabilities.

12. Book value of liabilities is expected to review  Enterprises should be in the balance sheet date is expected to review the book value of liabilities.  There is strong evidence that the book value does not reflect the current best estimate shall be in accordance with the current best estimate of the adjusted book value.

13. Related accounting treatment  1.estimated to confirm  non-operating expense  general and administrative expenses  selling expense  accrued liabilities  2. According to the current best estimate of adjusted book value of liabilities is expected to  non-operating expense  accrued liabilities  3. actual liabilities  contingency liability  cash in bank  4. Liabilities did not occur  reversal of the book value of expected liabilities  5.adjustment of tax matters

14. Product quality assurance  Should pay attention to the problem: 1.If you find the actual amount of guarantee fees and the number is expected to vary widely, the proportion is expected to be timely adjusted. 2.If the business is expected to determine the specific batch of product liability, the end of the warranty should be 'projected liabilities - Quality Assurance "written off the balance of subject 3.Have confirmation of the projected liabilities of its products, if the enterprise is no longer produced, then they should be the appropriate quality assurance period, should be 'projected liabilities - Quality Assurance "written off the balance of subjects. 4.Tax adjustments

15. Loss of contract Loss of contracts accounting principles: 1.If the obligations associated with the loss of the contract without paying any compensation can be withdrawn, usually there is no real corporate obligations, not confirmation of the projected liabilities;  2.If the obligations associated with the loss of an irrevocable contract, there is a real business obligations, if the obligation is likely outflow of economic benefits and the amount can be reliably measured, it shall confirm the expected liabilities;  3.Loss of the contract there is the underlying asset, it should be tested for impairment on the underlying assets, an impairment loss in accordance with regulations, in this case, the companies usually do not need confirmation of the projected liabilities, if the impairment loss exceeds the expected loss should be more than recognized as part of expected liabilities;  4.Loss of the contract there is no underlying asset, a loss is expected to meet contractual obligations related to the obligation and the conditions, it should be confirmation of the projected liabilities.

16. Restructuring obligations  Re-measurement of obligations  Enterprises shall, in accordance with the Restructuring expenses related directly to determine the expected liabilities 。  Should not be considered late loss of profits related to the disposal Or assets.  Direct expenditures do not include expenses related to activities.

17. The disclosure of matters  In addition to the minimum possible outflow of economic benefits liabilities of the enterprise, the enterprise should disclose the liabilities related information.  Companies usually should not be disclosed assets.  However, Or assets is likely to impose an economic interest, it shall disclose the reasons for its formation, the financial impact is expected to produce.  In pending litigation, pending arbitration cases, according to the aforementioned requirements of disclosure of all or part of the information expected to cause significant adverse impacts, companies need not disclose this information.  It should be disclosure of the pending litigation, pending the nature of arbitration, and did not disclose the facts and causes of such information.