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Pharma$-$C Inc. $($Pharma$-$C$)$ develops and manufactures generic prescription drugs and

over$-$the$-$counter medications. While Pharma$-$C is headquartered in the United States, its

parent company is headquartered in Germany. During November $2020,$ Pharma$-$C

distributed $10,000$ bottles of its grape$-$flavored children$$s cough medicine to various

distributors and retailers.

On December $31,2020,$ Pharma$-$C discovered that $2,000$ of the bottles were distributed

with dosing cups that are missing the appropriate $5$mL and $10$mL graduations. Pharma$-$C is

concerned that the use of the incorrect dosing cups could result in dangerous overdoses to

children.

There are no laws or regulations requiring Pharma$-$C to recall the children$$s cough

medicine because of the incorrect dosing cups. In addition, there have been no consumer

lawsuits brought against Pharma$-$C for the distributed bottles. Because of the potential risk

to children associated with the mislabeled dosing cups, Pharma$-$C decided to voluntarily

recall the children$$s cough medicine. On January $2,2021,$ Pharma$-$C announced the recall

of the affected bottles, which is estimated to cost Pharma$-$C $$10,000.$

Discussion:

In its financial statements for the year ended December $31,2020,$ how should Pharma$-$C

account for the voluntary product recall under: $(1)$ U$.$S$.$ GAAP and $(2)$ IFRS $$ in reporting

to its parent company in Germany?

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