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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IAS 37 PROVISION
Hi Sir,
there is a clause in a lease agreement.It states “internal condition of the property should be identical to that at the outset of the lease.” The lessee made some improvement to the property.The company recognises provision on the dismantling of the property since there is a present obligation (the clause).Is the obligation constructive or legal?
Provision is recognised on the repairs too because the lease agreement states the landlord can recharge these costs to the lessee. I read in my lecture notes that Provisions for repairs & maintance is not allowed.Why the company recognised the provision?
Thank you 🙂
Dismantling – legal obligation – recognise at start of lease and discount
Repairs – make provision if you cause damage and are legally required to repair it