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MFRS 137

APPLICATION OF THE RECOGNITION & MEASUREMENT RULES

future operating losses

restructuring

onerous contract

BEST ESTIMATE

PRESENT VALUE

  • judgement of management
  • based on past experience or similar transaction

EXPECTED DISPOSAL OF ASSET

time value of money is material amount of provision should be based on the present value of the expenditure

  • at times even from reports from independent experts

gain or losses from the disposal of asset are not to be taken into account in measuring the provision.

FUTURE EVENTS

RISK & UNCERTAINTIES

determine the best estimate for the amount of provisions.

affect the amount required to settle the obligation should be reflected in the amount recognised as provision where there is sufficient objective evidence that they will occur.

MEASUREMENT

  • best estimate
  • present value
  • risk & uncertainties
  • future events

PROVISION, CONTINGENT LIABILITITES & CONTINGENT ASSETS.

  • expected disposal of asset

recognition

CONTINGENT ASSETS (MFRS 137)

probable

possible and remote

virtually certain

possible asset that arises from past events, and whose existence will be confirmed only by the occurance or non-occurance of one or more uncertain future events not wholly within the entity.

CONTINGENT LIABILITIES (MFRS 139)

Thank you!

a possible obligation that arises from past events and whose existence will be confirm only by the occurance or non-occurance of one or more uncertain future events not wholly within the control of the entity.

recognition

OBLIGATION

probable

remote

LEGAL OBLIGATION

possible

CONSTRUCTIVE OBLIGATION

CONTIGENCY

"a condition or situation, the ultimate outcome of which, gain or loss, will be confirmed only on the occurance or non- occurance og one or more uncertain future events"

PROVISION

defined as "liabilities of uncertain timing or both".

however, provision are different from liabilities such as accruals & payable

provision are uncertain on the timing or amount of future expenditure required in settlement.

MFRS 137

recognition criteria

an entity has a present obligation (legal or constructive) as a result of past event.

it is probable that an outflow of resourcess embodying economic benefits will be required to settle the obligations.

a reliable estimate can be made of the amount of the obligations

PROVISION

CONTINGENT LIABILITIES

CONTINGENT ASSETS

LIABILITIES

A PRESENT OBLIGATION OF ENTERPRISE ARISING FROM PAST EVENTS, THE SETTLEMENT IS EXPECTED TO RESULT IN AN OUTFLOW FROM THE ENERPRISE OF RESOURCES EMBODYING ECONOMIC BENEFITS.

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