Explain this in simpler terms (easier to understand). PROVISIONA provision is an existing liability of uncertain timing oruncertain amount.The essence of a provision is that there is uncertainty aboutthe timing or amount of the future expenditure.It is this uncertainty that distinguishes provision from otherliabilities.The liability definitely exists at the end of reporting periodbut the amount is indefinite or the date when the obligationis due is also indefinite, and in some cases, the payee cannotbe identified or determined.Actually, a provision may be the equivalent of an estimatedliability or a loss contingency that is accrued because it isboth probable and measurable.

Provision is an amount kept separately for some uncertain event that may happen in the future (Just…

Answered: PROVIS A provision is an existing…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The present obligation is not a contingent liability but shall be recognized as a provision when *a. Amount is reasonably estimable and event occurs infrequentlyb. Amount is reasonably estimable and occurrence of event is probablec. Event is unusual in nature and occurrence of event is probabled. Event is unusual in nature and event occurrs infrequently
In the case of a non-adjusting event, IAS 10 requires it to be: Select one alternative: disclosed as a contingent liability, if it is an unfavourable material event reflected in the financial statements if it is material and relates to an item that would normally be included in the financial statements disclosed by way of note if it is material reflected in the financial statements, if it is an unfavourable material event; disclosed by way of a note, if it is a favourable event
Which of the following statements is false?a. A contingent liability should be disclosed in the notes to the financial statements if thereis a reasonable possibility that a loss (or expense) will occur.b. All contingent liabilities should be reported as liabilities on the financial statements,even those that are unlikely to occur.c. A contingent liability is a potential obligation that depends on the future outcome of pastevents.d. A contingent liability should be accrued if the loss is probable and the amount of theloss can be reasonably estimated.
When should a contingent liability be recognized and reported on the financial statements? A. Reporting contingent liabilities do not require they be probable or reasonably estimated B. When the contingent liability is probable C. When a reasonable estimation can be made of the amount owed D. When the contingent liability is probable and a reasonable estimation can be made of the amount owed
Short-term obligations are reported as noncurrent if the entity has a discretion to refinance it as long-term. True False
Which of the following is correct about contingent liabilities and provisions? The terms are interchangeable. A provision is based on an estimate while a contingent liability can be estimated reliably. A provision is disclosed in the statement of financial position while a contingent liability is disclosed in the notes. A contingent liability does not need to be disclosed in an entity's annual report.
The accrual of a contingent liability and the related loss should be recorded when the a. Loss resulting from a future event may be material in relation to income. b. Future event that gives rise to the liability is unusual in nature and nonrecurring. c. Amount of the loss resulting from the event is reasonably estimated and the occurrence of the loss is probable. d. Event that gives rise to the liability is unusual and its occurrence is probable.
Which of the following would not be considered a general long term liability?Select one:a. Long term promissory notesb. Long term portion of judgementc. Unfunded compensated absencesd. Unfunded rent obligation
Which of the following statements is false?Select one:a. A contingent liability should be disclosed in the notes to the financial statements if there is a reasonable possibility that a loss (or expense) will occur.b. A contingent liability should be accrued if the loss is probable and the amount of the loss can be reasonably estimated.c. A contingent liability is a potential obligation that depends on the future outcome of past events.d. All contingent liabilities should be reported as liabilities on the financial statements, even those that are unlikely to occur.
Short-term obligations can be reported as noncurrent liabilities if the company (a) intends to refinance ona long-term basis and (b) demonstrates the ability to do so by actual financing or a formal agreement to doso.
Which of the following is a characteristic of a current liability? A. It is an avoidable obligation. B. It occurs because of a future transaction or event. C. It cannot be settled with services. D. It creates a present obligation for future payment of cash or services.
Define contingent liability. What is the criteria to determine whether or not to report the contingency on financial statements? What supporting documentation is required? Please provide a detailed example of a contingent liability.

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