In which of the following circumstances might a provision be
recognized?
a)On 13 December 20X9 the board of an entity decided to close down
a division. The accounting date of the company is 31 December.
Before 31 December 20X9 the decision was not communicated to any of
those affected and no other steps were taken to implement the
decision.
b)The board agreed a detailed closure plan on 20 December 20X9 and
details were given to customers and employees.
c)A company is obliged to incur clean up costs for environmental
damage (that has already been caused).
d)A company intends to carry out future expenditure to operate in a
particular way in the future.
As per IAS 37, A provision is a liability of uncertain amount or timing
A provision might be recognized if a past event give rise to present obligation, and reasonable estimate can be made of the obligation
a) As the decision was not communicated to any of those affected and no other steps were taken to implement the decision, The probability that the economic benefits are required to be transferred for the obligation is not clear, thus no provision would be recognized.
b) A provision would be recognized in 20X9 financial statement as the reasonable estimate can be made of the obligation
c) A provision would be recognized as the past event give rise to present obligation.
d) As it is a future even and future expenditure and there is no present obligation, provision is not required
In which of the following circumstances might a provision be recognized? a)On 13 December 20X9 the...
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