scenario 1 energy inc energy which operates in the oil industry is a u s subsidiary 578441

Scenario 1Energy Inc. (Energy), which operates in the oil industry, is a U.S. subsidiary of a U.K.entity that prepares its financial statements in accordance with (1) IFRSs in reporting toits parent and (2) U.S. GAAP for reporting to its U.S. based lender. Energy’s operationssometimes result in soil contamination. Energy cleans up this contamination whenrequired to do so under the laws of the particular country in which it operates. Onecountry in which Energy operates has no legislation requiring cleanup, and Energy hasinadvertently contaminated land in that country in prior years. As of December 31, 20X1,it is virtually certain that a draft law requiring a cleanup of land already contaminatedwill be enacted, but not until shortly after the year end.

Required:Should Energy recognize a provision as of December 31, 20X1, (1) in reporting to itsU.K. parent under IFRSs and (2) in reporting to its U.S. based lender in accordance withU.S. GAAP?