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Hi what does it mean by ‘ obligation to transfer economic benefits? And outflow of resources for provisions.
Also see for provisions under ias37 is it permitted if a past obligation does not arise and does the full amount need to be recognised in a provision
Thanks
An “obligation to transfer economic benefit” would most typically be illustrated by an obligation to pay cash. However, the expression is not restricted to cash payments. It could so easily be applied to an obligation to deliver goods or provide services
“Outflow of economic resource” would be the actual payment of cash (or the delivery of goods or services) which then settles the obligation
OK?
I don’t understand your question in the second paragraph of your post
So obligation to transfer economic benefit means to deliver goods or services? Im looking at bpp question 4 in the revision kit. Where toxic gas has escaped and the company is due to a fine. How could this create an economic benefit?
Thanks
Paying the fine will involve the transfer of economic resource – the payment of cash.
And I think that you will probably agree that cash is an economic benefit. thus, the payment may be described as “the transfer of economic resource” or equally well described as “the transfer of economic benefit”
The escape of gas represents a “past event” which has “created an obligation” the “settlement of which will involve a transfer of economic benefit / resource”
Is that ok?
Thanks very much, the terminology used just got me confused. So economic/resource entirely means the same thing ( making a payment)
No, economic benefit is effectively the same as economic resource with a subtle difference. The outflow of the resource is reflected in some asset being credited or some liability being increased
Economic benefit does not necessarily involve an immediate reduction of an asset or increase in a liability. A “transfer of economic benefit” will ultimately be settled by an “outflow of economic resource” ie acknowledge the obligation (outflow of benefit) and then settle it (outflow of resource)
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