Provisions, contingent liab and assets ch12

Question 1

Are contra-asset accounts included as provisions under IAS 37?

Answer 1

No. It is the provision accounts that show as liabilities in the books that are included. (contra-assets such as doubtful debts are to be regarded as allowances)

Question 2

What is the definition of a provision?

Answer 2

A liability of UNCERTAIN timing and amount.

Question 3

Recognition criteria for provisions=?

Answer 3

1.PRESENT OBLIGATION due to past events.
2.PROBALBE OUTFLOW of economic resources.
3. a RELIABLE ESTIMATE can be made

Question 4

An obligating event can exist when either there is a ……. or …………

Answer 4

1. Legal obligation
2. Constructive obligation (company’s own standards/policies.

Question 5

Provisions should be regularly reviewed to ensure that …?

Answer 5

1.It is still the best estimate
2. The provision is still required.
3. If provision is carried at PV then it should account for the change in effect of discounting applied.

Question 6

Continent liabilities=?

Answer 6

POSSIBLE obligation that is dependent on future events or PRESENT obligation exists BUT if or HOW MUCH economic outflow will occur

Question 7

Should contingent liablities be recognised in the financial statements?

Answer 7

NO. But disclose in notes.

Question 8

Contingent asset=?

Answer 8

Possible asset arising on because of a past event but is dependent on an uncertain future event.

Question 9

Accounting treatment of a contingent asset=?

Answer 9

Disclose in the notes.

Question 10

Those events that provide evidence of conditions that existed at the reporting date =?

Answer 10

Adjusting event

Question 11

Should all adjusting events be accounted for?

Answer 11

ONLY IF MATERIAL

Question 12

Those event that are indicative of conditions that arose after the reporting period =?

Answer 12

Non-adjusting events.

Question 13

Should non-adjusting events be reflected in the financial reports?

Answer 13

In the notes IF MATERIAL.