Provisions and Events after reporting

A company has a legal obligation to remove an asset after it has finished with it in 8 years time.

How is this dealt with in the accounts?

• Dr Asset Cr Provision

• Dr Expense Cr Cash

The provision will be at what value initially?

• The amount to be paid

• A discounted amount

At 31 May 2016 Riley Co was being sued by a supplier over a disputed contract

Riley Co's solicitors advise that the supplier is likely to be successful and that damages of $100,000 will be awarded against them

How should this be dealt with in the accounts?

• A disclosure in the accounts

• Dr Expense 100,000 Cr Provision 100,000

How do provisions differ from other liabilities?

• They are not charged to profit for the year

• An outflow of resources is not probable

• They involve uncertain timing or amount

• They do not arise as a result of past events

Do you provide for an obligated future cost?

• No

• Yes

Do you provide for a refund if your policy is to give them out but you're not legally obliged to do so?

• No

• Yes

Do you provide for next years losses if you're virtually certain they're going to happen?

• Yes

• No

Do you provide for next years losses under a contract?

• No

• Yes

Big Co follow the revaluation model when it comes to PPE. So at the year end Big CO had revalued. The results came in 4 weeks after the year end but before the accounts were authorised for issue.

Should Big Co change the accounts to incorporate this information (ie Is this an adjusting event)?

• Yes

• No

When can we adjust our accounts for events occurring after the reporting date?

• If there figures we get are not material

• If the event gives us more information about the condition at the year-end

• If the directors believe the accounts must be adjusted