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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Provision and Contingent Liabilities
Hello Sir,
I would like to ask for the construction obligation whereby it has the practice of creating a valid expectation.
For eg, I did not state in invoice whereby I will allow the customer to refund the goods to me if those goods are faulty. However, by practice, I usually will refund even I didn’t state in the invoice.
In this situation, it is considered as provision OR contingent liabilities?
Thanks sir
Hi,
This would be a provision for the best estimate as by offering the refund as part of your practice, presumably stated somewhere in the shop or on the website that this is done, then this creates the constructive obligation.
Thanks