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1) Can provision be recognized for a short term loan interest? (Company knows about maturity date and the company normally settle short term loan before the maturity date. In that sense timing and amount is uncertain).
2) The company has a huge number of loan so calculating interest provision using an average rate. Does this represent a reliable estimate as per IAS 37?
“Please give an explanation of your answer”
Probably not a provision – but if you’ve seen something different in a past exam question, please let me know.
I would make a decision based on IAS 1:
Current liabilities are those: [IAS 1.69]
– expected to be settled within the entity’s normal operating cycle or
– held for purpose of trading or
– due to be settled within 12 months for which the entity does not have the right at the end of the reporting period to defer settlement beyond 12 months.Other liabilities are non-current.
In the exam all that matters is that you write out the definition (which will ensure that you pass!) and then have a stab at applying it.
Sir i didn’t get the answer i was looking for. May be i wasn’t clear enough
I wanted to know, can a company recognise provision for interest. I want to know the answer in “yes” or “no” and an explanation so that i can understand how it “meets” or “doesn’t meets” the criteria of provision.
It was not in any past exam..its a real life scenario and issue i m facing..
Remember :
Company normally settle loans before maturity date in that sense it seems logical to me that timing and amount is uncertain.Is it possible to get your email address so that i can ask for your advice in any accounting standards related to real life issue that i face during audit.
Or you can sent me a mail in
saimon.islam.1996@gmail.com
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