BACHELOR OF BUSINESS ADMINISTRATION

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BUSINESS ADMINISTRATION

FINANCIAL ACCOUNTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which of the following statements about provisions and contingencies is/are correct?1-A company should disclose details of the change in carrying amount of a provision from the beginning to the end of the year.2-Contingent assets must be recognized in the financial statements in accordance with the prudence concept.3-Contingent liabilities must be treated as actual liabilities and provided for if it is probable that they will arise.
A
All three statements are correct
B
1 and 3 only
C
2 and 3 only
D
3 only
Explanation: 

Detailed explanation-1: -An entity recognises a provision if it is probable that an outflow of cash or other economic resources will be required to settle the provision. If an outflow is not probable, the item is treated as a contingent liability.

Detailed explanation-2: -2. A contingent liability should be disclosed by note if it is probable that a transfer of economic benefits to settle it will be required, with no provision being made. 3.

Detailed explanation-3: -Option B This is correct because contingent liabilities are not recognised in the statement of financial position. IAS 37 requires the disclosure of contingent liabilities in the notes accompanying the statements unless the possibility of an outflow of resources is remote (IAS 37 para.

There is 1 question to complete.
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