1. IAS 37 Flashcards
What is the definition of a liability?
- Present obligation
- Resulting from a past event
- Expected future outflow
What is the criteria of liability to be recognized?
- Probable future outflow
2. Amount reliably measured
What is a provision?
A liability, but its amount is measured limited to best estimate.
An example of a provision?
An oil rig must be dismantled once done with, that dismantling cost is a liability with an estimated future value.
What is a contingent liability?
A liability where one or more of the criteria is not met.
Either not probable outflow or not measured reliably.
What is done with contingent liabilities?
They are NOT disclosed in SOFP but rather as a note to AFS
What is the definition of an asset?
- Resource controlled
- Resulting from last event
- Expected future inflow
What is the criteria of an asset to be recognized?
- Probable future income financial benefits
2. Measured reliably
What is a contingent asset?
A possible asset
E.g. Sue someone, may win.
What should be disclosed in the note concerning contingent assets and liabilities?
- Nature
2. Estimation of value, timing, probability
What is the definition of a provision?
- It’s a liability (legal/constructive)
2. Timing and value is uncertain
When can a provision be recognized?
- Probable future outflow
2. Reliable estimate of amount/timing/fair return rate.
What is the journal entry to raise a provision?
Dr. Asset/expense (P/L)
Cr. Provision (SOFP)
What are the steps of subsequent measurement of a provision?
- Unwind interest
- If change in estimated PV, provision must be adjusted
- Payment at end of term
Journal entry to unwind interest?
Dr. Finance charges (P/L)
Cr. Provision (SOFP)
