Measurement of Onerous Contract
There are number of ways of setting up a provision for an onerous contract. i.e
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Measurement of Onerous Contract
There are number of ways of setting up a provision for an onerous contract. i.e
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Provisions
The rules in IAS 37 that specify when a provision can be made are summarized in the 5 bullet points. In order for an entity to make provisions :-
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Warranties
A warranty is often provided in conjunction with the sale of goods. Warranty costs represent additional costs that the seller may have to incur to rectify the defects in, or to replace, the product it has sold. The warranty obligation can arise either through the operation of the law or through a company stated policies. Although warranty contract meets the definition of an insurance contract, they are scoped out of IFRS 4, and are covered within the scope of IAS 37.
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Environmental Liabilities
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Waste Electrical and Electronic Equipment IFRIC 6
The European Union’s Directive on Waste Electrical and Electronic Equipment (WE & EE) has given rise to questions about when the liability for the decommissioning of “WE & EE” shall be recognized. IFRIC 6 – “Liabilities arising from participating in a specific market – Waste electrical and electronic equipment”
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Abandonment and decommissioning costs
This interpretation applies to accounting in the financial statements of a contributor for interests arising from decommissioning funds. As per the “consensus,” the contributor shall recognize its obligation to pay decommissioning costs as a liability and recognize its interest in the fund separately unless the contributor is not liable to pay decommissioning costs even if the fund fails to pay.
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 17 August 2009
Please discuss on IAS 37
Thanks
Amit Daga
C.A Rohit Gambhir
(C.A)
(275 Points)
Replied 18 August 2009
One thing regarding IAS 37 I woud like to share with you, In the past, entities used to rationalize a shortfall in a provision based on the premise that for the same time period, there were more than required amounts provided as provisions in other cases. In other words, a shortfall in one provision was justified (and not adjusted) because it was balanced by excess in another provision. This practice would not be possible now since IAS 37 categorically states that a provision should be used for the purpose for which it was initially created or recognized. Furthermore, IAS 37 also mandates that changes in provisions shall be reviewed at each balance sheet date and the amount of provision should be adjusted accordingly to reflect the current best estimate.
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 19 August 2009
Thanks rohit for ur valuable comment
C.A Rohit Gambhir
(C.A)
(275 Points)
Replied 23 August 2009
its okay Amit, we should do something for more discussion on IFRS by other colleagues.
CA. Amit Daga
(Finance Controller CA. CS. CFA. CIFRS. M.COM. )
(9017 Points)
Replied 24 August 2009
Yes i am agreed with u
soundharya lakshmi
(CA Student)
(25 Points)
Replied 16 June 2021
Thank you for such a Comprehensive information sir.
As per IAS 37, Gains from future sale of assets shall not be adjusted against the measurement of Provision even if such assets are related to the provision.
But why the gains shouldn't be adjusted and what it means by adjustment against provision?
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 16 June 2021
Hello,
The future events- measurement of a provision must only be recognised when there is objective evidence that the sale will occur. Here, possibility of sale not occurring=possibility of sale occurrence. Hence, the revenue standard kicks in reminding us that revenue must be recognised only when a performance obligation is fulfilled and no need for provisioning,
Then, a contingent asset can be recognised if the sales of asset is probable but virtually not certain.
However, you can recognise provisions for sale of asset only after getting into a binding sale agreement.
Now, coming to disposal of non current assets standard IFRS 5, a ‘held for sale ‘ classification is given to assets which are going to be disposed. Once Asset is classified for sale, this asset will be presented separately from other asset and liabilities associated with it will be presented separately from other liabilities. See? No provisioning is required for this standard and no chance of revaluation gains as the asset will be measured at FVLCD and not at revaluation model.
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