ACCT 203 - Provisions, Contingencies, and Other Liabilities - 1 2 PDF

Provisions, Contingencies and Other Liabilities (IAS/PAS 37) Intermediate Accounting 3 1 PAS 37 PAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of uncertain timing or amount), toge...

Provisions, Contingencies and Other Liabilities (IAS/PAS 37) Intermediate Accounting 3 1 PAS 37 PAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible obligations and present obligations that are not probable or not reliably measurable). measured at the best estimate 2 CURRENT LIABILITIES are a company's short-term financial obligations that are due within one year or within a normal operating cycle. Three essential characteristics of liabilities: 1. Present obligation. 2. Arises from past events. 3. Results in an outflow of resources (cash, goods, services). 3 PROVISIONS A provision is a liability of uncertain timing or amount. 1. a present obligation has arisen as a result of a past event (the obligating event), 2. payment is probable ('more likely than not'), and 3. the amount can be estimated reliably. Measurement of provisions - best estimate of the expenditure required to settle the present obligation at the balance sheet date, Provisions for one-off events Provisions for large populations of events Both measurements are at discounted present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the liability. 4 5 REMEASUREMENT OF PROVISIONS [IAS 37.59] 1. Review and adjust provisions at each balance sheet date 2. If an outflow no longer probable, provision is reversed. 6 CONTINGENT LIABILITIES Contingent liabilities are possible obligations whose existence will be confirmed by uncertain future events that are not wholly within the control of the entity. 7 8 9 PROVISION FOR ENVIRONMENTAL CLEAN-UP 10 PROVISION FOR DAMAGES 11 PROVISION FOR WARRANTY 12 13 14 15 LIABILITY FOR BONUSES 16 17 18 19 VAT PAYABLE 20 VAT PAYABLE 21 PAYROLL TAXES (SSS, PAG-IBIG, PHILHEALTH, WTAX) 22 DISCOUNT VOUCHERS, COUPONS, AND OTHER CUSTOMER LOYALTY AWARDS 23 24 25 PREMIUMS AS COMPONENT OF TRANSACTION PRICE 26 PREMIUMS AS COMPONENT OF TRANSACTION PRICE 27 PREMIUMS REPORTED AS SELLING EXPENSE 28 29 30 CUSTOMER LOYALTY AWARDS - ENTITY 31 CUSTOMER LOYALTY AWARDS - ENTITY 32 CUSTOMER LOYALTY AWARDS - ENTITY CUSTOMER LOYALTY AWARDS – 3rd PARTY CUSTOMER LOYALTY AWARDS – 3rd PARTY UNEARNED REVENUES Collection in advance Upon satisfaction of performance obligation 36 GIFT CERTIFICATES OUTSTANDING 37 38 39 40 DIVIDENDS PAYABLE Cash – Current Undeclared – Not liability Dividends in arrears on cumulative preference shares – disclosed Property and Scrip – generally current Share – Not liability 41 DEPOSITS AND ADVANCES 42 DEPOSITS AND ADVANCES - ENTRIES 43 44 FS PRESENTATION A, L – Current and Non-current exc. Liquidity Current – 1. Normal Operating Cycle 2. Traded 3. Within 12 months 4. Does not have an unconditional right to defer settlement for at least 12 months Warranty – Split between Current and Non-current Dividends – Current Deposits and Advances – Split between Current and Non-current 45 DISCLOSURE REQUIREMENTS Reconciliation for each class of provision: [IAS 37.84] opening balance additions used (amounts charged against the provision) unused amounts reversed unwinding of the discount, or changes in discount rate closing balance A prior year reconciliation is not required. [IAS 37.84] For each class of provision, a brief description of: [IAS 37.85] nature timing uncertainties assumptions reimbursement, if any. 46 47 48 49 50 51 52