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Kim Smith.
Kim Smith.-
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Noah098
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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?
Kim Smith
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A provision is, by definition, a liability.
Noah098
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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….)
Kim Smith
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The “label” – provision, payable, accrual – doesn’t matter – as long as it is included in current liabilities.
Noah098
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