TOPIC 5: TRADE PAYABLES, PROVISIONS & CONTINGENT LIABILITIES

What is the nature of trade payables according to MFRS 139?

• They are only recognized when cash is received.

• They are recognized when payment is made.

• They are created when goods or services are acquired on credit.

• They are liabilities that are always settled immediately.

Under MFRS 137, when is a provision recognized?

• When it is certain that an outflow of resources will occur.

• When an entity has a present obligation as a result of a past event.

• When the amount can be measured with absolute certainty.

• When the future event is highly unlikely to occur.

What is the definition of a contingent liability according to MFRS 137?

• A liability that is always certain.

• An obligation that is not related to past events.

• A possible obligation that arises from past events.

• A present obligation that is recognized immediately.

How should trade payables be presented in the financial statement?

• As off-balance sheet items.

• As current liabilities.

• As equity.

• As non-current liabilities.

What is the measurement basis for trade payables?

• At the market value of the goods received.

• Only at historical cost.

• At fair value plus transaction costs.

• At the amount expected to be paid in the future.

What is a characteristic of provisions?

• They are always recognized in the financial statements.

• They do not require estimation.

• They are liabilities of uncertain timing or amount.

• They have a fixed amount and timing.

What is the best estimate of a provision?

• The amount that is least likely to be paid.

• The amount that the entity would rationally pay to settle the obligation.

• The maximum possible amount that could be required.

• The average of all possible outcomes.

When should a contingent asset be disclosed?

• When an inflow of economic benefits is probable.

• When it is recognized as an asset.

• When it is not expected to provide any benefits.

• When the outcome is certain.

What is a purchase discount?

• A discount given by the supplier to encourage prompt payment.

• A penalty for late payment.

• A fee charged for credit purchases.

• A discount given to encourage bulk purchases.

What should be included in the disclosure of provisions?

• The company's overall profit margin.

• The number of employees affected.

• The nature of the obligation and expected timing of outflow.

• The total revenue for the period.