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    Problem 4-1 Multiple Choice (PAS 37)

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    jay
    This document provides a multiple choice quiz with 10 questions on the correct definitions and accounting treatments related to provisions under PAS 37. The key points covered are: - The definition of a provision - When a provision should be recognized - The definition of a constructive obligation - What constitutes an obligating event - How the probability of an outflow of resources should be assessed - How to determine the amount recognized as a provision - How to estimate the amount when it involves a large population or single obligation - When reimbursement of a provision should be recognized

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    Problem 4-1 Multiple Choice (PAS 37)

    Uploaded by

    jay
    72 views3 pages
    This document provides a multiple choice quiz with 10 questions on the correct definitions and accounting treatments related to provisions under PAS 37. The key points covered are: - The definition of a provision - When a provision should be recognized - The definition of a constructive obligation - What constitutes an obligating event - How the probability of an outflow of resources should be assessed - How to determine the amount recognized as a provision - How to estimate the amount when it involves a large population or single obligation - When reimbursement of a provision should be recognized

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    valix

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    This document provides a multiple choice quiz with 10 questions on the correct definitions and accounting treatments related to provisions under PAS 37. The key points covered are: - The definition of a provision - When a provision should be recognized - The definition of a constructive obligation - What constitutes an obligating event - How the probability of an outflow of resources should be assessed - How to determine the amount recognized as a provision - How to estimate the amount when it involves a large population or single obligation - When reimbursement of a provision should be recognized

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
    72 views3 pages

    Problem 4-1 Multiple Choice (PAS 37)

    Uploaded by

    jay
    This document provides a multiple choice quiz with 10 questions on the correct definitions and accounting treatments related to provisions under PAS 37. The key points covered are: - The definition of a provision - When a provision should be recognized - The definition of a constructive obligation - What constitutes an obligating event - How the probability of an outflow of resources should be assessed - How to determine the amount recognized as a provision - How to estimate the amount when it involves a large population or single obligation - When reimbursement of a provision should be recognized

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    Problem 4-1 Multiple Choice (PAS 37)

    1. Which is the correct definition of provision?

    a. A possible obligation arising from past events.


    b. A liability of uncertain timing or amount
    c. A liability which cannot be easily measured
    d. An obligation to transfer funds to an entity.

    2. A provision shall be recognized when:

    I. An entity has a present obligation as a result of past event.

    II. It is probable that an outflow of resources embodying economic benefits will


    be required to settle the obligation.

    a. I and II only.
    b. I and III only
    c. II and III only
    d. I, II and III

    3. A constructive obligation is an obligation.

    I. That is derived from an entitys action that the entity will accept certain
    responsibilities because of past practice, published policy or current
    statement.

    II. The entity has created a valid expectation in other parties that it will
    discharge those responsibilities.

    a. I only
    b. II only
    c. Both I and II
    d. Neither I nor II

    4. It is an event that creates a legal or constructive obligation because that entity has
    no other realistic alternative but to settle the obligation.

    a. Obligating event
    b. Past event
    c. Subsequent event
    d. Current event

    5. An outflow of resources embodying economic benefits


    a. The probability that the event will occur is greater than the probability at the
    event will not occur.
    b. The probability that the event will not occur is greater than the probability that
    the event will occur.
    c. The probability that the event will not occur is the same as the probability that
    the event will not occur.
    d. The probability that the event will occur is 90% likely.

    6. What amount is recognized as provision?

    a. Best estimate of the expenditure


    b. Minimum of the range
    c. Maximum of the range
    d. Midpoint of the range

    7. Where there is continuous range of possible outcomes , and each point in that range
    as likely as any other, the range to be used is the:

    a. Minimum
    b. Maximum
    c. Midpoint
    d. Summation of Maximum and Minimum.

    8. When the provision involves a large population of items, the estimate of the
    amount.

    a. Reflects the weighting of all possible outcomes by their associated


    probabilities.
    b. Is determined as the individual most likely outcome.
    c. May be the individual most likely outcome.
    d. May be the individual most likely outcome.

    9. When the provision arises from a single obligation, the estimate of the amount

    a. Reflects him weighting of all possible outcomes by their associated


    probabilities.
    b. Is determined as the individual most likely outcome.

    c. Is the individual most likely outcome adjusted for the effect of other possible
    outcomes?
    d. Midpoint of the possible outcomes.
    10. Which of the following statements is incorrect where some or all of the
    expenditure required to settle a provision is expected to be reimbursed by another
    party?

    a. The reimbursement shall be recognized only when it is virtually certain that the
    reimbursement will be received if the entity settles the obligation.
    b. The amount of the reimbursement shall not exceed the amount of provision.
    c. The reimbursement shall be netted against the estimated liability for the
    provision.
    d. In the income statement, the expense relating to the provision may be presented
    net of the reimbursement.

    ANSWERS:

    1. B 6. A
    2. D 7. C
    3. C 8. A
    4. A 9. C
    5. A 10. C

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