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Hello.
1.there is a obligation but a reliable estimate cannot made. What does it mean reliabke. And why cannot made
2.why warranty is provision and guarantee is liability?
3.what does it mean remote. If obligation is remote– what des it mean!
THANKS an advance 🙂Please help me for this quest
Contingent liabiliti must be treated as a actual liability and provided for it is propable that they will arise.
Is it correct?1. Suppose you offer guarantees on what you sell. If it stops working then you will have to replace it and it will cost money.
Some always stop working, so you will definitely end up having to pay out some money. But how can you know in advance what the amount is going to be? You cannot make a reliable estimate.2 Who told you that a warranty is a provision and a guarantee is a liability?
3 Remote means that it is very unlikely (the chances of having to pay are less than 5% as it says in the table).
And yes – your second statement is correct (except that the word is probable, not propable 🙂 )
Sorry – its a peculiarity of the English!
In general use, ‘possible’ means something might happen, but is not certain.
So a contingent liability is one where there might be a liability but it depends on something else (like maybe the outcome of a court case).However, for the IAS ‘rule’, how likely it is to happen is defined as being virtually certain, or probable, or possible, or remote, depending on the chances of it happening.
so why it is not treated as provision but actual liability, sir? I think actual liability when it is virtually certain. Can you please explain this?
A provision is shown as though it is a liability. Have you watched my free lectures on this? 🙂
You can find a link to all of the lectures from the main Paper FA page:
https://opentuition.com/acca/fa/
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