12 ABCD 12.4 ) The following items have to be considered in finalising the financial statements of Q, a limited liability company: The company gives warranties on its products. The company's statistics show that about 376 or sales give rise to a warranty claim. 1 he company has guaranteed the overdraft of another company, The likelihood of a liability arising under the guarantee is assessed as possible. According to IAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action to be taken in the financial statements for these items? Create a provision Disclose by note only No action 1 1, 2 1

12 ABCD 12.4 ) The following items have to be considered in finalising the financial statements of Q, a limited liability company: The company gives warranties on its products. The company's statistics show that about 376 or sales give rise to a warranty claim. 1 he company has guaranteed the overdraft of another company, The likelihood of a liability arising under the guarantee is assessed as possible. According to IAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action to be taken in the financial statements for these items? Create a provision Disclose by note only No action 1 1, 2 1

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

ABCD
company:
he company gives warranties on its products The company's statistics show that about 5% of
sales give rise to a warranty claim.
1
The
me company has
arising under the guarantee is assessed as possible.
guaranteed the overdraft of another company. The likelihood of a liability
According to TAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action
to be taken in the financial statements for these items?
Create a provision
Disclose by note only
No action
1
1, 2
1

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