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Questions and Answers
In accounting, what are the major issues to address regarding provisions?
What distinguishes provisions from other liabilities?
What does IAS 37 NOT cover in terms of provisions?
Which term is used for liabilities to pay for goods or services that have been received but not yet invoiced?
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Which of the following is a specific issue in accounting for provisions?
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What is the main difference between accruals and provisions?
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What is the key characteristic that sets provisions apart from other liabilities?
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Which term is used in accounting for liabilities to pay for goods or services that have been received but not yet invoiced?
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What is the primary focus of IAS 37 in relation to assets and liabilities?
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Which statement best describes the term 'provision' as used in accounting standards?
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In accounting terminology, what is the key difference between accruals and provisions?
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Which term is often used in some countries to denote a reduction in the value of an asset?
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What major issue must be addressed in accounting for provisions according to IAS 37?
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What is NOT covered by the standard IAS 37 regarding provisions and liabilities?
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In which scenario would there be much less inherent uncertainty compared to provisions?
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'Remeasurement on subsequent reporting dates' is a part of accounting for provisions specifically addressing which issue?
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Study Notes
IAS 37: Provisions
- IAS 37 applies to all provisions and contingencies apart from those covered by specific requirements of other standards.
- Provisions differ from other liabilities because of uncertainty about the timing and/or amount of future cash flows required to settle the liability.
- Accruals are liabilities to pay for goods or services that have been received or supplied but not yet invoiced.
Key Characteristics of Provisions
- Provisions have a higher degree of uncertainty compared to accruals in terms of measurement.
- The term "provision" is sometimes used to describe the reduction in value of an asset (e.g. provision for depreciation, provision for doubtful debts), but this is not covered by IAS 37.
Accounting Issues for Provisions
- Three major accounting issues to address:
- Whether or not a provision should be recognized.
- How to measure a provision that is recognized.
- What is the double entry on initial recognition of a provision and how is it remeasured on subsequent reporting dates.
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Description
This quiz covers the recognition of provisions according to IAS 37, including the differences between provisions and accruals. Topics include understanding the uncertainty around future cash flows, estimation in measurement, and applicability of IAS 37 to all provisions and contingencies.
