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Q. Accord to ias37 what is correct action to be taken in financial statements for these items?
ie whether it create provision or disclose by note only
1. The company has guaranteed the overdraft of another company.The likelihood of a liability arising under guarantee is assessed as possible.
What is meaning of these statement?It means that the company has promised that if the other company does not repay the overdraft to the bank, then our company will pay it.
The likelihood of our company having to pay the money is possible – i.e. the probability of them having to pay it is between 5% and 50%
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