Acca financial Accounting (FA) Study Text ac ca (FA)

State with reasons what adjustments, if any, should be made by 

Madras in the financial statements. 

Movement in provisions 

Provisions should be reviewed at each statement of financial position date and 

adjusted to reflect the current best estimate. 

Increase in provision 

Dr Relevant expense account 

$X 

 Cr 

Provision 

$X 

Decrease in provision: 

Dr Provision 

$X 

 

Cr Relevant expense account 

$X 

 

 

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Payables, provisions and contingent liabilities 

216

 

KAPLAN PUBLISHING

 

6 

IAS 37 disclosure requirements 

Reporting provisions in the final accounts 

Provisions are reported as a liability in the statement of financial position. 

Provisions may be classed as either a current or non-current liability, depending 

upon the subject matter of the provision. 

Disclosure 

According to IAS 37 the following are the key disclosure requirements relating 

to provisions, contingent liabilities and contingent assets: 

•

 

when the requirement is to provide for a contingent liability, the liability is 

reflected in the financial statements, but called a provision in order to 

highlight the uncertainty surrounding it 

•

 

the movement in this provision is recorded in the financial statements each 

year 

•

 

when disclosure is made by note, the note should state: 

– 

the nature of the contingency 

– 

the uncertain factors that may affect the future outcome 

– 

an estimate of the financial effect, or a statement that such an 

estimate cannot be made. 

 

 

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