Tesselek Technology, Inc., is a relatively new company and has been operating for only the past five years. It was set up by two leading scientists Mr. Tess and Mr. Lek. The company is involved in the development of high speed electric cars which are in high demand. The company has enjoyed very rapid growth and equally high profitability. Although the company has employed an excellent group of well competent employees, its overall future development plans were highly dependent on the two senior scientists. On November 3, 2020, the two scientists had an accident in a race to test their new car model. Both were killed in that accident and now, the company's future plans have come to a near dead stop. The stock market answered badly to this news, the company stock price had dropped nearly by 70% and the remaining members of the Board of Directors have instructed the CFO to account for this loss of market value estimated at between $350M-$500M ( probability is equally distributed) as a contingent loss. The Board members argue that if a new expert is not found quickly, the company may have to be sold off or dissolved. Instruction- Determine the amount of the loss which could be written off assuming the company is using IFRS. Include any entries to show the write-off, if there is any.
Tesselek Technology, Inc., is a relatively new company and has been operating for only the past five years. It was set up by two leading scientists Mr. Tess and Mr. Lek. The company is involved in the development of high speed electric cars which are in high demand. The company has enjoyed very rapid growth and equally high profitability. Although the company has employed an excellent group of well competent employees, its overall future development plans were highly dependent on the two senior scientists.
On November 3, 2020, the two scientists had an accident in a race to test their new car model. Both were killed in that accident and now, the company's future plans have come to a near dead stop. The stock market answered badly to this news, the company stock price had dropped nearly by 70% and the remaining members of the Board of Directors have instructed the CFO to account for this loss of market value estimated at between $350M-$500M ( probability is equally distributed) as a contingent loss. The Board members argue that if a new expert is not found quickly, the company may have to be sold off or dissolved.
Instruction-
Determine the amount of the loss which could be written off assuming the company is using IFRS.
Include any entries to show the write-off, if there is any.
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