Asked by Giavanna Battaglia on May 01, 2024
Verified
AASB 137 Provisions, Contingent Liabilities and Contingent Assets provides the definition of a/an as: 'a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it'.
A) future operating loss.
B) deferred liability.
C) onerous contract.
D) present obligation.
Onerous Contract
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
AASB 137
The Australian Accounting Standards Board standard that deals with the treatment of provisions, contingent liabilities, and contingent assets.
Future Operating Loss
A projected loss from future operations, not yet incurred or realized, often considered in impairment assessments and going concern evaluations.
- Attain knowledge on the benchmarks for distinguishing provisions, contingent liabilities, and contingent assets according to AASB 137.
- Distinguish among various categories of obligations (legal, constructive, and equitable) and their consequences on financial disclosures.
Verified Answer
JB
Jackie BarberisMay 06, 2024
Final Answer :
C
Explanation :
The definition provided pertains to an onerous contract, which is a situation where the costs of fulfilling the obligations of a contractual agreement outweigh the economic benefits expected to be received under it. This requires recognition of a provision under AASB 137. The other options, future operating loss, deferred liability, and present obligation, do not fit the definition given in the question.
Learning Objectives
- Attain knowledge on the benchmarks for distinguishing provisions, contingent liabilities, and contingent assets according to AASB 137.
- Distinguish among various categories of obligations (legal, constructive, and equitable) and their consequences on financial disclosures.