Which ONE of the following would require a provision to be created by BW at its reporting date of 31 October 20X5?
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1 .Which of the following statements about provisions, contingencies and events after the reporting period is correct?
A A company expecting future operating losses should make provision for those losses as soon as it becomes probable that they will be incurred B Details of all adjusting events after the reporting period must be disclosed by note in a company’s financial statements C A contingent asset must be rec...
2 .Which of the following statements about contingent assets and contingent liabilities is true?(1) A contingent asset should be disclosed by note if an inflow of economic benefits is probable.(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) No disclosure is required for a contingent liability if it is less than probable that a transfer of economic benefits to settle it will be required.
A 1 only B 2 only C 3 only D None of these statements
3 .IAS 37 Provisions, Contingent Liabilities and Contingent Assets deals with accounting for contingencies. An entity has a present obligation that probably requires the outflow of economic resources and a contingent asset where the inflow of economic benefits is probable.How should the entity treat the present obligation and contingent asset?
A Present obligation：Provided for ；Contingent asset：Disclosed B Present obligation：Provided for ；Contingent asset：Not disclosed C Present obligation：Disclosed, but not provided for ；Contingent asset：Disclosed D Present obligation：Disclosed, but not provided for ；Contingent asse...
4 .The following describe potential provisions.(1) A provision to cover refunds. The company is in the retail sector and has a reputation for a “no questions asked” policy on refunds.(2) A provision to cover an onerous contract on an operating lease. The lease was on a building which the company has subsequently vacated. The lease cannot be terminated and cannot be re-let.In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets in which of the above situations would a company be allowed to recognise a provision in its financial statements?
A Neither situation B Both situations C Situation 1 only D Situation 2 only
5 .Porter is finalising its financial statements for the year ended 30 September 20X3.A former employee of Porter has initiated legal action for damages against the company after being summarily dismissed in October 20X3. Porter ’s legal advisors feel that the employee will probably win the case and have given the company a reasonably accurate estimate of the damages which would be awarded. Porter has not decided whether to contest the case.How should this item be classified in the financial statements of Porter for the year ended 30 September 20X3?
A A non-adjusting event B An adjusting event C A contingent liability disclosed by way of note D A provision
7 .WDC’s year end is 30 September 20X1.Which ONE of the following should be classified by WDC as a non-adjusting event according to IAS 10 Events After The Reporting Period?
A WDC was notified on 5 November 20X1 that one of its customers was insolvent and was unlikely to repay any of its debts. The balance outstanding at 30 September 20X1 was USD42,000 B On 30 September WDC had an outstanding court action against it. WDC had made a provision in its financial statements ...
8 .IAS 10 Events After the Reporting Period distinguishes between adjusting and non-adjustingevents.Which ONE of the following gives rise to an adjusting event?
A A dispute with workers caused all production to cease six weeks after the year end B A month after the year end the directors decided to cease production of one of three product lines and to close the production facility C One month after the year end a court awarded damages of USD50,000 to one of...
9 .The draft financial statements of a limited liability company are under consideration. The accounting treatment of the following material events after the reporting period needs to be determined:(1) The bankruptcy of a major customer, with a substantial debt outstanding at the end of the reporting period.(2) A fire destroying some of the company’s inventory (the company’s going concern status is not affected).(3) An issue of shares to finance expansion.(4) Sale for less than cost of some inventory held at the end of the reporting period.According to IAS 10 Events After the Reporting Period, which of the above events require an adjustment to the figures in the draft financial statements?
A 1 and 4 only B 1, 2 and 3 only C 2 and 3 only D 2 and 4 only
10 .Which of the following events between the end of the reporting period and the date the financial statements are authorised for issue must be adjusted in the financial statements?(1) Declaration of equity dividends.(2) Decline in market value of investments.(3) The announcement of changes in tax rates.(4) The announcement of a major restructuring.
A 1 and 2 only B 2 and 4 only C 3 and 4 only D None of them
