Asked by Waleed Abdullah on Apr 24, 2024
Verified
When a contingency must be accrued under IFRS, the charge is referred to as
A) an extraordinary loss
B) a provision
C) an appropriation
D) a risk expense
Contingency
An existing condition or situation whose outcome is uncertain and will be confirmed only upon the occurrence or non-occurrence of one or more uncertain future events.
IFRS
A global set of accounting standards formulated by the International Accounting Standards Board (IASB), known as International Financial Reporting Standards.
- Discern and differentiate various categories of contingencies and how they are handled in financial statements.
Verified Answer
DM
Dylan Maghdid7 days ago
Final Answer :
B
Explanation :
Under IFRS, a contingency that meets certain criteria (such as a present obligation arising from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount) must be accrued as a provision. Provisions are charges against profit, and they are recorded on the balance sheet as a liability. Option A is not correct as there is no concept of extraordinary items under IFRS. Option C is not correct as appropriations relate to the allocation of profits, not charges against profit. Option D is not a recognized term under IFRS.
Learning Objectives
- Discern and differentiate various categories of contingencies and how they are handled in financial statements.
Related questions
Which of the Following Contingencies Is Usually Not Accrued in ...
Which of the Following Contingencies Is Usually Accrued ...
FASB Established the Use of the Terms Probable, Reasonably ...
Which of the Following Loss Contingencies Is Not Usually Accrued ...
Which One of the Following Contingencies Requires Financial Statement Disclosure ...