Hello,
If company recognised provision for the law suit, and after the reporting date, court ruled that company has to make compensation. Will this make provision to liability? As it is virtually certain to make a outflow of economic benefits.
Thank you in advance.
Ask the Tutor ACCA SBR
Ias 37
6y ago
6y ago#1Hi,
A provision is a liability, it is just different as its timing or amount is uncertain in comparison to a standard liability. The court case and the amounts to be paid are therefore shown as a provision within the liabilities section.
Thanks
6y ago#2Thank you for your reply.
If court ruled that the entity should make a specific amount at specific date or by specific date. Amount and timing is certain.
How will this affect provision? Will the account be changed to something like compensation payable?
6y ago#3Yes, it would then sit under payables but you aren't likely to see something like this in the exam.
Thanks
Sign into reply to this topic.