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Coram & Co Sept 18

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Coram & Co Sept 18

  • This topic has 3 replies, 2 voices, and was last updated 7 months ago by Kim Smith.
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  • November 21, 2021 at 8:47 am #641229
    Noah098
    • Topics: 936
    • Replies: 352
    • ☆☆☆☆☆

    maam in this question’s part a) ii) why isn’t the legal claim a liability? the payment of $1.2million is virtually certain( as the case has been won by customer and court has confirmed the amount to be paid to the customer) so shouldn’t it be recognised as a liability rather than as a provision?

    November 21, 2021 at 11:35 am #641239
    Kim Smith
    Keymaster
    • Topics: 88
    • Replies: 6096
    • ☆☆☆☆☆

    A provision is, by definition, a liability.

    November 21, 2021 at 11:51 am #641240
    Noah098
    • Topics: 936
    • Replies: 352
    • ☆☆☆☆☆

    No offence ma’am, but I seem to differ here with you. I do get that provision is defined as a liability of uncertain amount/timing, but then liability is virtually certain and there is no uncertainty with regards to timing or amount, which is the case here. hence I was wondering why the word liability has not been used? instead of provision( which always rings the bell of uncertainty! and in this case there is no uncertainty everything’s certain hence my argument….)

    November 21, 2021 at 12:45 pm #641241
    Kim Smith
    Keymaster
    • Topics: 88
    • Replies: 6096
    • ☆☆☆☆☆

    The “label” – provision, payable, accrual – doesn’t matter – as long as it is included in current liabilities.

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