ACCAF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