F3 Chapter 5 practise test questions 3 and 4 - why different approuch of provisions?
3. Customer claim -5000, lawyers advice -3000, provision -3000.
4. Customer claim - 100 000, lawyers advice -60%(100 000), provision-100 000. Why not 60 000?
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Provisions
10y ago#1There is no difference in the approach (and both questions are past exam questions).
In question 3, the probable outcome is that they will have to pay $3,000 and so according to the standard the provision is $3,000.
In question 4, the probable outcome (because it is more than 50% probability) is that they will lose the case and therefore have to pay $100,000. In addition they will have to pay the lawyer $10,000. So a total of $110,000 is needed as a provision.
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