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Provision

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Provision

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 11, 2018 at 9:18 am #436356
    miracle657
    Participant
    • Topics: 65
    • Replies: 26
    • ☆☆

    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

    February 11, 2018 at 10:03 am #436374
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54831
    • ☆☆☆☆☆

    It would only be a current liability if they were sure that the amount would be payable within the following 12 months.

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  • The topic ‘Provision’ is closed to new replies.

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