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Dear sir,
Could you explain the meaning of Constructive Obligation (IAS 37) and Legal Obligations and which one needs to be recorded as a provision?Thanks!
Dear sir,
I believe I’ve understood the prev question I asked , so no need to clear this doubt.However, I’m curious as to the treatment of reimbursement according to IAS 37. Why is an asset created with the full amount? Wouldn’t it be easier to put it in Current assets directly?
Also, the amount recognized should not be greater than provision. Why’s this?
Thanks!
“Why is an asset created with the full amount?”
Because, if it’s virtually certain that the amount will be received, then we recognise the virtual certainty … in full
“Wouldn’t it be easier to put it in Current assets directly?”
This bit of your post I don’t understand – is that not what happens when we recognise the receivable – we debit current assets
“Also, the amount recognized should not be greater than provision. Why’s this?”
Because to do so would be to recognise a profit before it has been achieved
OK?
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