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Financial Liability Versus Contingent Liability

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Financial Liability Versus Contingent Liability

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by P2-D2.
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  • February 28, 2017 at 5:13 am #374666
    kylerlu
    Member
    • Topics: 84
    • Replies: 117
    • ☆☆☆

    Hi Sir Chris!

    I was looking at June 2014 Q3 b. And “the amount of 50K paid at the end of each year for three years provided that the player has competed in all the specified tournaments.” -is considered a financial liability.

    I was just wondering how come it was not dealt with under provisions, contingent liabilities instead? Thanks!

    March 1, 2017 at 8:21 pm #375005
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi Kyler,

    IAS 37 deals with uncertainty and in this instance there isn’t really any uncertainty as there is a contract in place. Due to the contract we meet the definition of a financial liability (contractual obligation to pay cash) and so it is dealt with as a financial instrument.

    Thanks

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