Recognized provision only when: 1. There is a present obligation as a result of past event. 2. An outflow of economic benefits is probable. 3. The amount of the obligation can be estimated reliably.
1. Contract or law 2. Constructive obligation
Measured at the best estimate. 1. Most likely outcome single obligation 2. Midpoint continuous range of possible outcomes 3. Weighting of all possible outcomes involves large population of items 4. Present value effect of time value of money is material
Review at each reporting date and adjust to reflect the current best estimate.
Full PFRS
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Use of Provision
V. Other measurement considerations Risk specific to the liability
Expected disposal of assets
Reimbursement
Recognize adjustment: 1. in profit or loss 2. as cost of an asset - if the amount of provision is originally recognized as part of the cost of an asset 3. as a finance cost if provision is measured at the present value of the amount required to settle the obligation
Should be charged only for expenditures for which the provision is originally recognized.
Should be reflected either in the discount rate or in the estimation of the amount required to settle the obligation but not both.
Exclude gain from the measurement of provision
Recognized as an asset when it is virtually certain that the entity will receive the reimbursement. The amount shall not exceed the amount of provision.
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VI. Must accrue: Onerous contract Warranties Restructuring if legal or constructive obligation to restructure Sales refunds
VII. Must not accrue: Future operating losses, no matter how probable Possible future restructuring (only a plan)
VIII. Contingent Liabilities Not recognized as liabilities Disclosure No disclosure Impracticable to disclose
IX. Contingent Assets Not recognized as an asset Disclosure
Shall be presented as an asset and shall not be offset against the estimated liability for provision. May be offset against the expense relating to the provision.
Unless acquired in a business combination
If possibility is remote State such fact
Required, inflow of economic benefit is probable
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Recognized as an asset
No disclosure Impracticable to disclose
If inflow of economic benefits is virtually certain If remote State such fact