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Hi sir,
I have a revison mcq question which confused me.
Q4) What is the appropriate treatment in the financial statements if it is probable that an event occured that an event that occurred before the period end will give rise to an asset?
A) set up a contingent asset
B) disclose details in the notes
C) no adjustment and disclosure are required
D) establish a provision for the amountThe answer given is B.
Why the answer not D by given a provision since it is probable?Thanks you sir.
If it were a liability that would probably arise then the liability should be recognised in the FS.
As it’s only an asset that might probably arise it is only referred to in the notes. To be recognised as an asset in the FS it has to be virtually certain.
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