ACCA-F7-知识点总结

ACCA考试F7知识点辅导

I。 The accounting problem

Before IAS37 provisions were recognized on the basis of prudence，

little guidance was

given on when a provision should be recognized and how it should be measured。

This gave rise

to inconsistencies， and also allowed profits to be manipulated。

Some problems are noted below：

（a） Provisions could be recognized on the basis of management intentions，

rather than

on any obligation to be entity;

（b） Several items could be combined into one large provision。 There were known as ‘big

bath’ provisions;

(c) A provision could be created for one purpose and then used for another;

(d） Poor disclosure made it difficult to assess the effect of provisions on reported profits。

In particular, provisions could be created when profits were high and released when profits were

low in order to smooth profits.

(1) Definitions

IAS 37 views a provision as a liability.

A provision is a liability of uncertainty timing or amount；

A liability is an obligation of an enterprise to transfer economic benefits as a result of past

transactions or events。

Provision must be based on obligations, not management intentions。

(2) Under IAS37, a provision should be recognized：

a。 When an enterprise has a present obligation；

b. It is probable that a transfer of economic benefits will be required to settle it;

c。 A reliable estimate can be made of its amount；

if a reasonable estimate cannot be

made，

then the nature of the provision and the uncertainties relating to the amount and timing

of the cash flows should be disclosed.

A provision is made for something which will probably happen. It should be recognized

when it is probable that a transfer of economic events will take place and when its amount can

be estimated reliably。

（3) Contingent liabilities

Definition

The Standard defines a contingent liability as：

(a) A possible obligation that arises from past events and whose existence will be confirmed

only by the occurrence or non—occurrence of one or more uncertain future events not wholly

within the control of the enterprise； or

（b） A present obligation that arises from past events but is not recognized because:

（i) It is not probable that an outflow of resources embodying economic benefits will be

required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

As a rule of thumb， probable means more than 50％ likely。

If an obligation is probable, it

is not a contingent liability – instead， a provision is needed.

Treatment of contingent liabilities

Contingent liabilities should not be recognized in financial statements but they should be

disclosed. The required disclosures are：

（a） A brief description of the nature of the contingent liability;

（b) An estimate of its financial effect；

（c) An indication of the uncertainties that exist;

（d) The possibility of any reimbursement;

(4) Contingent assets

Definition

A possible asset that arises from the past events whose existence will be confirmed by the

occurrence of one or more uncertain future events not wholly within the enterprise's control。

A contingent asset must not be recognized. Only when the realization of the related

economic benefits is virtually certain should recognition take place。 At that point，

the asset is

no longer a contingent asset。

Disclosure： contingent assets

Contingent assets must only be disclosed in the notes if they are probable. In that case a

brief description of the contingent asset should be provided along with an estimate of its likely

financial effect。

II。 Specific application

1. Future operating losses

In the past，

provisions were recognized for future operating losses on the grounds of

prudence。 However these should not be provided for the following reasons。

①They relate to future events；

②There is no obligation to a third party. The loss—making business could be closed and the

losses avoided.

2. Onerous contracts

An onerous contract is a contract in which the unavoidable costs of meeting the contract

exceed the economic benefits expected to be received under it。

A common example of an onerous contract is a lease on a surplus factory. The leaseholder is

legally obliged to carry on paying the rent on the factory， but they will not get any benefit from