• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

PQ Awards Nominations

Please help us to win one of the PQ Magazine awards and send in the voting form >>
You can nominate us in any or all of the following categories: Online College of the Year, Study Resource of the Year, Private Sector Lecturer of the Year, and Accountancy Personality of the Year.

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

IAS 37

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › IAS 37

  • This topic has 6 replies, 4 voices, and was last updated 7 years ago by cardine.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • November 13, 2015 at 3:40 pm #282182
    mrb1
    Member
    • Topics: 5
    • Replies: 5
    • ☆

    A factory worker of ICL Co was seriously injured on 10 June 2015 during a production process.Subsequent developments in this matter are as follows:

    (i) On 26 July 2015 the worker filed a claim for 25 million and alleged violation of safety measures on part of ICL. The lawyers of ICL anticipate that there is 60% probability that court would award 12 million and 40% likelihood that the amount would be 8 million.

    Required: Whether a provision is required to be incorporated for the year ended 30 June 2015.

    November 14, 2015 at 5:35 pm #282373
    cardine
    Member
    • Topics: 4
    • Replies: 135
    • ☆☆

    Colleagues;

    Provision should only be recognized when:
    there is a present obligation; transfer of the company’s economic benefits to settle claim and there is a reliable estimate.

    The situation in the case:
    At the company’s financial reporting date – it’s probability that it will have to pay 12 million; therefore, information from the legal team should be use to satisfy the criteria of the standards. There are valid ground – seriously injured on the job and bring the obligation to pay for damages – estimated at 12 millions. This will result in an outflow of the company’s resources – economic value – deteriorating finance as an expense which was never budgeted.

    Liability increase – Cr Provisions with the amount and Dr the corresponding expense. Note that it must relate to the corresponding financial year only – April to March 2015 for example; it must be accounted in the SoFP. Providing that the company has received the claim – Lawyers advice; it MUST on June 30, 2015 show the entries in the SoFP.

    It is obvious that this claim will be settled in another financial year – Crediting method of payment – bank using a cheque as evidence (receipt) and clear the provision with a debiting entry of the amount.

    November 15, 2015 at 10:54 am #282516
    lavinia69
    Participant
    • Topics: 5
    • Replies: 121
    • ☆☆

    Just reading through this and I was wondering if there is an obligation at the year end of 30th June?
    The employee did not file a claim until end July. So in June there was no legal requirement (although ethically you could argue a point) and no figure provided by the lawyers. But as it was a serious accident, it would be prudent to presume some compensation would be required.

    Maybe I am just over thinking this?
    But I can be forgiven for that as it draws closer to the exams…..

    🙂

    November 15, 2015 at 12:30 pm #282535
    cardine
    Member
    • Topics: 4
    • Replies: 135
    • ☆☆

    The financial statements for 2015 – 30 June should show the actions of the company during its reporting year – ALL. The event took place before the financial year and the claim was filed July 2015.

    There is an obligation at year end – it is probable for success, measurable with an outflow of resources.

    This is testing for IAS 37 and IAS 10; it is an adjusting event.

    November 15, 2015 at 4:16 pm #282578
    lavinia69
    Participant
    • Topics: 5
    • Replies: 121
    • ☆☆

    An adjusting event. That makes sense now. Thank you

    December 2, 2015 at 4:52 pm #287022
    jordan224
    Member
    • Topics: 1
    • Replies: 4
    • ☆

    so it’s not 60%x12 + 40%x8=10.4, Dr P or L Cr provision? Instead we only take 12 into account as the amount with highest probability? what about 50% 50%?

    December 2, 2015 at 5:19 pm #287025
    cardine
    Member
    • Topics: 4
    • Replies: 135
    • ☆☆

    Disclose by – notes to the financial statements; remember, the steps for creating a provision – probable which is more than the 50%; say 51. Anything else we must disclose by note or ignore. I have learn in the early stage of accounting – provision are probable greater than fifty percent.

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • tobimillz100 on Activity Based Costing part 1 – ACCA Performance Management (PM)
  • omarcham on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • ANISH1903 on Outsourcing, shared services and disruptive technologies – ACCA Strategic Business Leader (SBL)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy