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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

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Chapter11Provisionsandcontingencies

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

多做几道

Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal

use?

A

The fair presentation concept

B

The accruals concept

C

The going concern concept

D

The business entity concept

Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal

use?

A

The fair presentation concept

B

The accruals concept

C

The going concern concept

D

The business entity concept

According to the IASB's Conceptual Framework for Financial Reporting, which TWO of the following are part of faithful

representation?1 It is neutral2 It is relevant3 It is presented fairly4 It is free from material error

A

1 and 2

B

2 and 3

C

1 and 4

D

3 and4

Which of the following accounting concepts means that similar items should receive a similar accounting treatment?

A

Going concern

B

Accruals

C

Matching

D

Consistency

Listed below are some characteristics of financial information.1 Relevance2 Consistency3 Faithful representation4 Accuracy

Which of these are qualitative characteristics of financial information according to the IASB's Conceptual Framework for

Financial Reporting?

A

1 and 2 only

B

2 and 4 only

C

3 and 4 only

D

1 and 3 only

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