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Essay / Research Paper Abstract
This 6 page paper examines and summarizes the contents of the international accounting standards IAS 37 which deals with Provisions, Contingent Liabilities and Contingent Assets; outlining the contents of the standard and the practical impact that the standard hats on annual accounts. The bibliography cites three sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEias37.rtf
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Unformatted sample text from the term paper:
measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their
nature, timing and amount" (IAS 37). This is a measure aimed at increasingly clarity and transparency as well decreasing the potential for misleading or the misunderstanding of the way existing
obligations, probable and possible assets and liabilities are recognized in the accounts (IAS Plus, 2008). Under IAS 37 it is necessary to recognize to recognize a liability when there
is an existing obligation, which may be a legal or a constructive obligation, it should also be recognized where there is a probable outflow of resources embodying economic benefits and
where that financial obligation can be quantified with a reasonable estimate. These need to be recorded as provisions (IAS Plus, 2008). They are classified as provisions rather than other
liabilities, such as accruals and trade debts, as there is some uncertainty concerning an aspect of their payment, such as the timing or the exact amount that will be required
for settlement. This contrasts with other liabilities where there is certainly, such as trade debts where there is a fixed amount and an agreed payment date (IAS Plus, 2008).
Where there is a provision made this is not presenting a certainty, just a probable event, using the best available estimate. This will take into consideration the risks and uncertainties
that are linked to the potential liability as well as the time value of money if it is material to the valuation, however, it will not make provision for any
tax implications (IAS Plus, 2008). The provision made will reflect the future event as long as there is enough objective evidence that it will take place. However, when it comes
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