Week 3 prov, contingent;.pptx - PROVISION CONTINGENT...

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PROVISION, CONTINGENT LIABILITIES AND CONTINGENT ASSETS MFRS 137
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definition - provisions and other liabilities - relationship between provisions and contingent liabilities
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Provision Provisions is any future expenses are probable to occur except that the exact amount and timing is not easily determine . This obligation is a result from the current economic events (i.e. past events) but the outcome will be in the future. To qualify a provision as a probable event, it should be highly like to occur rather than not. The constructive obligation (not because of legal requirement) to the entity arose due to the pattern of past practices, published policies or specific current statement made and will result a valid expectation by the counterparty that the entity will discharge or perform the responsibilities.
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Provision provision for future expenditure can be recognized if the entity: has a present obligation either legal (required by the law) or constructive (valid expectation arose) to perform as a results from past events. is probable to transfer economic benefit to settle the obligation. Can reliably estimate cost of the provisions.
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recognition The amount to be recognized (i.e. measurement) as provisions at the end of any reporting period (YE) should be based on the best estimation of the required future settlement. $ $ D r Provisions expenditures – P/L XXXX C r Provisions liabilities - SOFP XXXX
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measurement - best estimate - risks and uncertainties - present value - future events - expected disposal of assets
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reimbursement Any financial support in the form of reimbursement from third party (e.g. insurance) to ease the burden can be recognized only if it is virtually certain to be received. The reimbursement is separately recognized as asset (e.g. compensation receivable). The amount of recognized reimbursement should be limited to the provision (i.e. not larger than provisions amount). The amount from provisions and reimbursement receivable can be net-off in P/L.
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changes in provisions Any changes to the measurement should be change accordingly in P/L at each YE.
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use of provisions Provisions should only be used for the purpose for which they were originally recognised. They should be reviewed at
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