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contingent asset

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › contingent asset

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.
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  • May 24, 2021 at 1:42 pm #621621
    Noah098
    • Topics: 936
    • Replies: 352
    • ☆☆☆☆☆

    march 2020 Ecoma Co. Q4b)i) again!

    sir again the same question! Now i have a doubt related to the provision we have created pertaining to contingent consideration of $0.4m that has a 40% chance of accruing to the entity.

    Now in F7 we had studied that if the chances of contingent asset are less than 50% then we ignore, if between 50-95% then disclose through note and over 95% we need to recognise an asset.

    so here if the probability was less than 40%, should not we have ignored the asset(receipt of $0.4m) ???

    Why find the expected value??

    May 25, 2021 at 10:41 am #621732
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2529
    • ☆☆☆☆☆

    Normal rule – only recognise if probable, as you say.

    There used to a minor exception re cancelled leases under OLD RULES. I suggest you ignore this.

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