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Stephen Widberg.
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Noah098
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march 2020 Ecoma Co. Q4b)i)
sir in this question am struggling to understand why $6m+$6m/1.05, cannot be recorded as our current liability? the payment is virtually certain, so why not record it as a liability?
We create provision when it is probable that there will be an outflow of economic resources, but here the rent payment is virtually certain so should not it be recorded as a liability?
Noah098
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forget the aspect of the contract being onerous, i am struggling to understand simply why not a liability and why specifically a provision?
Stephen Widberg
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A provision IS a liability – it’s just that it is uncertain in timing or amount.
Whether you call it provision or liability is a judgement call. If it’s touch and go both answers would be marked right.
Noah098
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