Chapter 7 Flashcards
What is a provision?
Liability of uncertain timing or amount
What is a liability?
Present obligation arising from past events
When can a provision be recognised?
Present obligation as a result of a past event
Probable that an outflow of resources embodying economic benefits required to settle obligation
Reliable estimate can be made of the amount of the obligation
What is a onerous contract?
Contract which the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to be received under it
What would a provision be required for?
The cheapest option of exiting the contract:
Cost of fulfilling contract
Any penalties payable for failing to fulfil contract
When can a provision for restructuring costs be made?
Entity has detailed formal plan
Raised a valid expectation in those affected that it will carry out the restructuring by: starting to implement it, announcing it
Is a contingent asset recognised?
No but disclosed in a note if inflow is considered probable
What is a contingent liability?
Possible obligation that arises from poor events and whose existence will be confirmed only be occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity
Is a contingent liability recognised?
No but disclosed in a note when unless the possibility of outflow is remote
