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Kit mcq Provision

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Kit mcq Provision

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 20, 2019 at 10:11 pm #516654
    maxpopper
    Member
    • Topics: 177
    • Replies: 132
    • ☆☆☆

    Rainbird decided to reorganize manufacturing facility during Nov 20X1 and commissioned consulting engineer to carry out a feasibility study. A provision for reorganziation was created at 31 dec 20×1.
    Rainbird accountant is preparing financial statement for year to 31 dec 20X1 and is not too sure about provision setup for reorganization of the facility.
    Sir in answer they have stated that provision should not be created for reorganization. Can you please me this why?

    May 21, 2019 at 8:33 pm #516763
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    There is no present obligation. In order to create the provision it must have a detailed formal plan in place or it has been communicated to the employees involved.

    Thanks

    May 21, 2019 at 11:52 pm #516790
    maxpopper
    Member
    • Topics: 177
    • Replies: 132
    • ☆☆☆

    Sir I know that in order to create provision there must be a detailed formal plan and a valid expectation is created through announcement or by starting restructuring.

    So here in Question as is it mentioned that commissioned consulting engineer to carry out a feasibility study, so isn’t this mean that restructuring has started?

    May 24, 2019 at 7:20 pm #517195
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    It is a feasibility study and the results of this will determine whether there is any obligation. As it stands, there is no obligation.

    Thanks

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