Provision

Question 1

Provision

Answer 1

IAS 37 defines a provision as a liability that involves uncertainty of either or both
- Amount of outflow
- timing of the outflow

Question 2

Contingent Liability

Answer 2

Obligation that does not meet:
- Liability definition
- Recognition criteria

Question 3

Liability recognition criteria

Answer 3

As per the conceptual framework, a liability must be recognised only when you know the:
● probability
● measurement

Question 4

Liability

Answer 4

Conceptual framework defines a liability as
- a present obligation of the entity
- arising from past event
- the settlement will result in an outflow of the entity resources embodying economic benefits

Question 5

Obligation event

Answer 5

• Event
• Legal obligation
  -Results in entity having no option but to settle the amount owing

Question 6

Constructive obligation

Answer 6

Entity’s actions where:
- Established pattern of practice
- entity indicates that it accepts responsibility

Question 7

Legal obligation

Answer 7

Legally required to settle amount owing

Question 8

Asset

Answer 8

• A present economic resource
• controlled by the entity
• as a result of a past event

Question 9

Provision journal entries

Answer 9

Dr expense [p/l]
Cr provision [SFP]

Question 10

Contingent asset

Answer 10

Possible asset whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events that’s not wholly within the control of the entity.
- Not recognised but it is disclosed