IAS-37 Provisions and Contingent Assets+Liabilities

Question 1

Define Provision

Answer 1

• Liability of uncertain timing or amount

Question 2

When to recognise a provision

Answer 2

• Entity has a present obligation (legal or constructive) resulting from a past event.
• Will result in a probable outflow of economic benefits.
• A reliable estimate can be made.

Question 3

How to measure a provision

Answer 3

• Best estimate of expenditure.

- Should be discounted if time value of money is material.

Question 4

Define Contingent A+L

Answer 4

• Possible asset or liability,
• Arising from past events,
• Whose existence will only be confirmed by occurrence of future event,
• Which is outside entity’s control.

Question 5

Recognising Contingent A+L

Answer 5

• Should not be recognised.

- Should disclose in f/s if probable.