Kit mcq provision — OpenTuition Forums

MMax7y ago

AP has following legal action outstanding A legal action claiming compensation of $500000 filed against AP in March 20X4. It is more likely than not that amount claimed will have to be paid How should AP report it in financial statement for Y/E 31 march 20X5? Correct ans is Provision Sir here one thing I want to ask that , here reliable estimate of 500000 has been made + there are probable chances. But 1 thing I want to ask that here is it a present obligation OR is it a possible obligation?

P2-D2Tutor7y ago#1

More likely than not is probable and not possible, hence the provision. Thanks

MMax6y ago#2

Sir but here one thing I want to ask that , here reliable estimate of 500000 has been made + there are probable chances. But 1 thing I want to ask that here is it a present obligation OR is it a possible obligation?

P2-D2Tutor6y ago#3

Hi, We wouldn't be involved in legal action if something hadn't happened, so there must be a present obligation and here it would be a legal one.. Thanks

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