At each reporting date, an entity should review an existing provision and adjust it to reflect the:
Correct answer: B. Current best estimate of the obligation
- A. Original amount estimated
- B. Current best estimate of the obligation
- C. Amount paid in the previous year
- D. Total amount of related revenue
Explanation
IAS 37 requires provisions to be reviewed at each reporting date and adjusted to the current best estimate. The original estimate or previous payment does not automatically remain appropriate.
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About Accruals, Prepayments and Provisions
Accruals and prepayments adjust income and expenses to the accounting period in which they are earned or incurred, following the matching principle. Provisions recognise expected obligations or losses when their amount or timing is uncertain, which distinguishes them from ordinary accruals and from general reserves.
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More Accruals, Prepayments and Provisions questions
A business has a prepaid expense of Rs 6,000 at the beginning of the year. It pays Rs 30,000 during the year and has a prepaid balance of Rs 10,000 at year-end. What expense is recognized?
An accrued expense has an opening balance of Rs 8,000. During the year, cash paid for the expense is Rs 70,000, and the closing accrual is Rs 12,000. What expense is charged for the year?
If an obligation is possible but the related outflow of economic benefits is remote, IAS 37 generally requires the entity to:
Under IAS 37, a contingent asset is generally recognized in the financial statements when the related economic benefits become:
A provision recognized for a specific obligation should be used for: