IAS 37- Provisions, Contingent Liability And Continent Assets Flashcards
1
Q
What is a provision
A
- a liability of uncertain timing or amount
2
Q
Most companies would like to
A
- to maintain investor interest most companies would like to report a nice steady growth pattern
3
Q
Under IAS 37
A
- appropriate measurement and recognition criteria are applied to provisions, contingent liabilities and contingent assets and information must be provided in the notes to the accounts to explain exactly why a provision is needed
4
Q
In order to create a provision, the following criteria must be met
A
- there is a present obligation arising as a result of past events
- it is probable that a transfer of economic benefits will be required to settle the obligation
- the obligation must be measure reliably (model- have logic)
( application of conceptual framework)
5
Q
Requirements for recognition/disclosure
A
Degree of prob- Liability of uncertain timing or amount- Asset of uncertain timing or amount
- virtually certain, not contingent * provision * recognise as a receivable
- probable * provision (effects profit) * disclose in note (doesn’t affect profit)
- possible * disclose in note * no disclosure
- remote * no disclosure * no disclosure
6
Q
Common examples of provisions
A
- depreciation
- bad debt
- slow moving stock
- repairs
- customer returns
- legal costs
- future pension costs
7
Q
Provisions are based on
A
- estimate or judgement
- maybe in factual data but also subjective judgement
8
Q
Provisions can never be
A
- 100% accurate
9
Q
Contingent liability
A
- is as a possible obligation arising from past past events whose outcome is based on uncertain future events
10
Q
Contingent asset
A
- is a possible asset that arises from past events and whose existence will only be confirmed by uncertain future events not wholly within the control of the enterprise
