WorksheetsProvisions, Contingent Liabilities (Non-Graded Assessment)
Total questions: 5
Worksheet time: 11mins
In 20x1, an entity, a defendant, recognized a ₱100,000 provision for estimated losses from a pending lawsuit. In 20x2, the entity wins the lawsuit and pays nothing. Which of the following statements is correct in 20x2?
The entity shall restate its 20x1 financial statements to remove the provision.
The entity shall recognize a gain of ₱100,000 in 20x2.
The entity shall recognize a ₱100,000 deduction in its 20x2 expenses.
The entity shall only disclose the event in its 20x2 financial statements.
The board of directors of ABC Inc. decided on December 15, 20XX, to wind up international operations in the Far East and move them to Australia. The decision was based on a detailed formal plan of restructuring as required by PAS 37. This decision was conveyed to all workers and management personnel at the headquarters in Europe. The cost of restructuring the operations in the Far East as per this detailed plan was P2 million. How should ABC Inc. treat this restructuring in its financial statements for the year-end December 31, 20XX?
Because ABC Inc. has not announced the restructuring to those affected by the decision and thus has not raised an expectation that ABC Inc. will actually carry out the restructuring (and as no constructive obligation has arisen), only disclose the restructuring decision and the cost of restructuring of ₱2 million in footnotes to the financial statements.
Recognize a provision for restructuring since the board of directors has approved it and it has been announced in the headquarters of ABC Inc. in Europe.
Mention the decision to restructure and the cost involved in the chairman’s statement in the annual report since it a decision of the board of directors.
Because the restructuring has not commenced before year-end, based on prudence, wait until next year and do nothing in this year’s financial statements.
Which of the following is the proper way to report a gain contingency?
As an accrued amount.
As deferred revenue.
As an account receivable with additional disclosure explaining the nature of the contingency.
As a disclosure only.
Which of the following contingencies need not be disclosed in the financial statements or the notes thereto?
Probable losses not reasonably estimable
Environmental liabilities that cannot be reasonably estimated
Guarantees of indebtedness of others
All of these must be disclosed.
To record an asset retirement obligation (ARO), the cost associated with the ARO is
expensed.
included in the carrying amount of the related long-lived asset.
included in a separate account.
none of these.
