The following items have to be considered in finalising the financial statements of Q, a limited liability company: 1 The company gives warranties on its products. The company’s statistics show that about 5% of sales give rise to a warranty claim. 2 The company has guaranteed the overdraft of another company. The likelihood of a liability arising under the guarantee is assessed as possible.According to IAS 37 Provisions, contingent HabHities an financial statements for these items? Create a provision Disclose by note only No action
A、1 2
B、1 2
C、1,2
D、2 1
A、1 2
B、1 2
C、1,2
D、2 1
【参考答案及解析】
A provision is required for the warranties sold, it should be calculated using the expected value approach. 2 is a contingent liability because it is possible that the company will have to pay out, if it was probable, then a provision would be required. If it was remote, no disclosure would be needed
A provision is required for the warranties sold, it should be calculated using the expected value approach. 2 is a contingent liability because it is possible that the company will have to pay out, if it was probable, then a provision would be required. If it was remote, no disclosure would be needed