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Hello Sir,
Could you kindly explain why is restructuring cost not an adjusting event? Weren’t things obvious at reporting date that restructure would happen?
Thanks.
IAS 37 requires that a provision for restructuring costs is only set up if there is a constructive obligation at the balance sheet date. It further states that there must be a detailed plan which has been communicated to those affected. If these conditions are not met with no provision can be set up. IAS 37 was introduced to prevent and abuse where companies were set up fictitious provisions and therefore the rule is strictly applied.
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