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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Provision
A business has been told by its lawyers that it is likely to have to pay $10,000 damages for a product that failed. The business duly set up a provision at 31 December 20X7. However, the following year, the lawyers found that damages were more likely to be $50,000.
How is the provision treated in the accounts at 31 December 20X7?
EXTRACT FROM STATEMENT OF FINANCIAL POSITION
Non-current liabilities*
Provision for damages $10,000
* Because it is uncertain when the amount relating to the provision will be paid, or indeed if it definitely will be paid, it is classified as a non-current liability.
Sir, I didnt understand the given explanation above..Why provision is non-current?Generally how can we determine the provision current or non-current,pls explain it,thanks in advance
It would only be a current liability if they were sure that the amount would be payable within the following 12 months.