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The government introduces a number of changes to the income tax system. As a result of these changes, Energy will need to retrain a large proportion of its administrative and sales workforce in order to ensure continued compliance with the new regulations in the future. Energy expects to begin its training efforts in March of 2014 and is trying to determine whether the costs associated with the upcoming training should be accrued as a liability in its December 31, 2013 financial statements.


1. For each individual scenario above, discuss reasons (1) why the company should and (2) why the company should not recognize a liability as of December 31, 2013. These are not clear-cut scenarios, so you should discuss reasons both for and against recognizing the liabilities.

2. Provide a recommendation regarding whether the company should recognize a liability and/or whether the company should disclose any information regarding the above scenarios within their December 31, 2013 financial statements. Be sure to support your recommendation using the FASB Codification, conceptual framework, etc.


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