PAS 37 - PAS37 PROVISIONS,CONTINGENT LIABILITIESAND...

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PAS 37 PROVISIONS, CONTINGENT  LIABILITIES AND  CONTINGENT ASSETS
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MODULE OBJECTIVES Define provisions, contingent liabilities and contingent assets. Present the recognition and measurement principles for provisions Identify disclosure requirements for provisions, contingent liabilities and contingent assets. Present sample disclosures for provisions
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LIABILITIES Provisions a liability of uncertain timing or amount. Contingent liabilities possible obligations to be confirmed by future events not wholly within the control of the enterprise, or present obligations of which the outflow of economic benefits is not probable or which cannot be measured reliably
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PROVISIONS VS. CONTINGENT LIABILITIES Provisions Present obligation Meets the recognition criteria of PAS 37: - Probable outflow of resources - Can be measured reliably Recognized as liabilities Contingent Liabilities Possible obligations, yet to be confirmed or Present obligations that do not meet the recognition criteria of PAS 37 Not recognized as liabilities
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RECOGNITION OF PROVISIONS A provision should be recognized when An enterprise has a present obligation as a result of a past event It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. A reliable estimate can be made of the amount of the obligation.
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LEGAL OBLIGATIONS A legal obligation is an obligation that arises from a contract a legislation other operations of law
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CONSTRUCTIVE OBLIGATIONS A constructive obligation results from a established pattern of past practice or published policies or a sufficiently specific current statement in which the entity has indicated that it will accept certain responsibilities As a result, the entity has created a valid expectation from other parties that it will discharge those responsibilities.
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MEASUREMENT OF PROVISIONS Single Obligation The best estimate is the most probable amount. Large Population of Items The best estimate is the expected value of the outcomes When there is continuous range of possible outcomes, and each point is as likely as any other, the best estimate is the midpoint of the range.
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MEASUREMENT OF PROVISIONS Consider the time value of money. Where the effect of the time value of money is material, measure the provision at the present value of the expenditures. Use a pre-tax discount rate that considers the risks specific to the liability. When the provision is measured at present value, the carrying amount is increased each period to reflect the passage of time. The increase is finance cost.
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MEASUREMENT OF PROVISIONS OTHER FACTORS TO CONSIDER Risks and uncertainties Future events where there is sufficient objective evidence that they will occur NOT CONSIDERED - Gains from expected disposal of assets - Future operating losses
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REIMBURSEMENTS Expected reimbursements from another
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PAS 37 - PAS37 PROVISIONS,CONTINGENT LIABILITIESAND...

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