Possible Exam

Scenarios
Warranties
Yes there is a legal
obligation so provide.
The amount is based on
the class as a whole
rather than individual
claims. Use expected
values
Major Repairs
These are not provided
for. Instead they are
treated as replacement
non current assets.
See that chapter
Self Insurance
This is trying to provide
for potential future fires
etc. Clearly no provision
as no obligation to
pay until fire actually
occurs
Environmental
Contamination
Clearance
Yes provide if legally
required to do so or
other parties would
expect the company to
do so
as it is its known policy
Possible Exam
Scenarios
Warranties
Yes there is a legal
obligation so provide.
The amount is based on
the class as a whole
rather than individual
claims. Use expected
values
Major Repairs
These are not provided
for. Instead they are
treated as replacement
non current assets.
See that chapter
Self Insurance
This is trying to provide
for potential future fires
etc. Clearly no provision
as no obligation to
pay until fire actually
occurs
Environmental
Contamination
Clearance
Yes provide if legally
required to do so or
other parties would
expect the company to
do so
as it is its known policy
Possible Exam
Scenarios
Warranties
Yes there is a legal
obligation so provide.
The amount is based on
the class as a whole
rather than individual
claims. Use expected
values
Major Repairs
These are not provided
for. Instead they are
treated as replacement
non current assets.
See that chapter
Self Insurance
This is trying to provide
for potential future fires
etc. Clearly no provision
as no obligation to
pay until fire actually
occurs
Environmental
Contamination
Clearance
Yes provide if legally
required to do so or
other parties would
expect the company to
do so
as it is its known policy
Possible Exam Scenarios
Warranties -Yes there is a legal obligation so provide. The amount is
based on the class as a whole rather than individual claims. Use
expected values
Major Repairs-These are not provided for. Instead they are treated
as replacement non-current assets. See that chapter
Self-Insurance-This is trying to provide for potential future fires etc.
Clearly no provision as no obligation to pay until fire actually occurs
Environmental Contamination Clearance-Yes provide if legally
required to do so or other parties would expect the company to do
so as it is its known policy
Decommissioning Costs -All costs are provided for. The debit would
be to the asset itself rather than the income statement
Restructuring -Provide -if there is a detailed formal plan and all
parties affected expect it to happen. Only include costs necessary
caused by it and nothing to do with the normal ongoing activities of
the company (e.g. don’t provide for training, marketing etc)
Reimbursements-This is when some or all of the costs will be paid
for by a different party. This asset can only be recognised if the
reimbursement is virtually certain, and the expense can still be
shown separately in the income statement