The International Financial Reporting Standards developed standards can
be implemented to ascertain the provisions and disclosures to be made.
The correct responses are;
According to the financial reporting standard, the contingent liability that
Amazon Inc. should disclose and the provision that Amazon Inc. should
recognize, based on the legal consent are;
Lawsuit 1: It is not required to make provision or disclosure because the
probability of the lawsuit progressing is remote and therefore, the
Company will not be required to payout money or lose economic benefits.
Lawsuit 2: The likelihood of the Company having pay the displaced
employees is high however, the amount payable is $2 million, and
therefore, a provision of $2 million is required in the financial reporting.
Lawsuit 3: The Company is not legally obliged to pay for or perform the
cleanup, but based on the relationship between the Company's waste
location, the river, and the community, there is a constructive obligation,
the amount of which cannot be determined with reliability.
Therefore, there is a requirement for disclosure as a contingent liability,
and not a provision as the claim cannot be classified as a provision.
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