Friday, April 11, 2008
Today, I learned about contingencies and events after Balance Sheet, this is the summary:
IAS 10: Events after B.S Date
1. The events are events that occur after the B.S date but will affect the financial statement that has already been authorised for issue.
2. Types of events that is taken into account under IAS 10 are adjusting events (debtor closing down a business) and non adjusting events (fire, flood)
3. Dividends: Proposed dividends should not be recognised as a liability but shown as a not to F.S.. Notice that I stated proposed meaning that it has not been confirmed.
4. Disclosure must include:
a. nature of event
b. estimate of the financial effect or a statement that such an estimate cannot be made.
IAS 37: Provisions & Contingencies
1. A provision is a liability of uncertain timing or amount.
2. A liability is an obligation of entity to transfer economic benefits as a result of past transactions or past events.
3. Contingent Liability: A possible obligation that arises from past events and whose existence will be confirmed only by occurence or non-occurence of one or more uncertain future events not wholly within the entity's control. (example: pending legal suit)
4. Contingent Asset
5. Virtually certain (more than 95%): C.L- provision, C.A-recognise
Probable (50% to 95%): C.L- provision, C.A- Note
Possible (5% to 50%): C.L- Note, C.A- No disclosure
Remote (less than 5%): C.L-No disclosure, C.A- No disclosure
6. Disclosure by Nature:
- nature of contingency
- uncertain factors
- estimate of finacial effect or statement that it cannot be estimated
Double Entry for Provision will be to Cr Provision a/c as it is a contra assest account.
IAS 10: Events after B.S Date
1. The events are events that occur after the B.S date but will affect the financial statement that has already been authorised for issue.
2. Types of events that is taken into account under IAS 10 are adjusting events (debtor closing down a business) and non adjusting events (fire, flood)
3. Dividends: Proposed dividends should not be recognised as a liability but shown as a not to F.S.. Notice that I stated proposed meaning that it has not been confirmed.
4. Disclosure must include:
a. nature of event
b. estimate of the financial effect or a statement that such an estimate cannot be made.
IAS 37: Provisions & Contingencies
1. A provision is a liability of uncertain timing or amount.
2. A liability is an obligation of entity to transfer economic benefits as a result of past transactions or past events.
3. Contingent Liability: A possible obligation that arises from past events and whose existence will be confirmed only by occurence or non-occurence of one or more uncertain future events not wholly within the entity's control. (example: pending legal suit)
4. Contingent Asset
5. Virtually certain (more than 95%): C.L- provision, C.A-recognise
Probable (50% to 95%): C.L- provision, C.A- Note
Possible (5% to 50%): C.L- Note, C.A- No disclosure
Remote (less than 5%): C.L-No disclosure, C.A- No disclosure
6. Disclosure by Nature:
- nature of contingency
- uncertain factors
- estimate of finacial effect or statement that it cannot be estimated
Double Entry for Provision will be to Cr Provision a/c as it is a contra assest account.
Labels: accountancy, accounting, financial accountancy, financial accounting
what we could have been, 11:05 PM.
