Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

IAS & IFRS Standards Overview > IAS 37 > Flashcards

IAS 37 Flashcards

1
Q

What are the present obligations as a result of a past event?

A

Constructive
Legal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When to make a provision?

A

Present obligation as result of past event

Probable transfer/outflow of economic benefit >50%

Measure the outcome reliably

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does probable mean?

A

Greater than 50% chance of outflow occurring

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Initial measurement of provision?

A

Best estimate of expenditure

Expected values

Discount to PV if materially different

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When should provision be reviewed?

A

Annually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When should provision only be used for?

A

Expense originally created

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Dismantling cost? Double entry

A

Debit: PPE
Credit: Provision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Unwinding of interest?

A

Debit: Finance cost (SPL)
Credit: Provision (SFP)

Growing the provision to its final value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a contingent liability?

A

Possible obligation

Present obligation that can’t be measured or no probable outflow of resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

If I have a contingent liabiltiy?

A

Disclose the liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is a warranty?

A

A legal obligation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What makes a provision probable?

A

It has happened in the past

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What if something is possible?

A

A contingent liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Possible?

A

Less than 50% of losing the case

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What should be disclosed in contingent liability?

A

Amount
Nature

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

When to measure as a provision?

A

Probable chance
Can be measured reliably

17
Q

How to measure provision for single obligation?

A

Look for most likely outcome if it is probable

18
Q

How to measure provision for large population?

A

Based on expected values of possible outcomes

19
Q

How is future provision treated in FSs?

A

Discounted to date of provision in FS
Debit: Expense (SPL)
Credit: Provision

Unwind the discount:
Discounted PV * cost of capital * pro-rata
Debit: FInance cost
Credit: Provision

Discounted to earlier date in FS + Unwind the discount = Total provision

20
Q

What is unwinding the discount?

A

Adjusting the present value of future cash flows to reflect their current value

21
Q

What is done with future operating losses?

A

No provision can be made for anticipated losses as there is no obligation

No obligation = No provision

22
Q

What is an onerous contract?

A

Cost of fulfilling contracts exceeds benefits from the contract

23
Q

How is a provision recognised for an onerous contract? (PV)

A

Lower of:

PV of continuing under contract

PV of exiting the contract

24
Q

Examples of restructuring?

A

Sale or closure of a line of business
Ceasing activities in a geographical location
Relocating activities
Re-organisation

25
Q

When is a provision recognised in restructuring?

A

If a detailed formal plan and the plan has been announced

26
Q

What does the restructuring provision only include?

A

Costs that are necessarily incurred and not associated with continuing activities

27
Q

What is a contingent asset/

A

Uncertainty about receipt of asset in the future

28
Q

What is done when an asset is virtually certain?

A

Recognise an asset

29
Q

What is done when an asset is probable?

A

Disclose

30
Q

What is done when an asset is remote/possible?

A

Ignore

31
Q

Are unrecoverable legal costs a provison?

A

Yes, as they will happen

32
Q

When are costs capitalised?

A

Acquire, produce or improve an asset

33
Q

Estimation for a single obligation point of action?

A

Most likely settlement provided in FSs. Others discarded

34
Q

Calculating a provision for FSs?

A

Discount to PV, then unwind discount

Amount in SFP: Discounted amount + discount

35
Q

Example of contingent asset?

A

Inventory that was stolen

36
Q

Difference between contingent asset and liability

A

Potential future assets vs. potential future obligations

37
Q

What is a constructive obligation?

A

An obligation that arises from an entity’s past actions

38
Q

What is a legal obligation?

A

An obligation that arises from a contract

IAS & IFRS Standards Overview (73 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions