Answered: Discuss with reference to IAS37 whether…

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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ABC Ltd is a large company that consists of many divisions. The toy division was not operating effectively and so management has decided to restructure the Toy division. It will combine the toy division with the clothes division. Management created a detailed, formal plan for restructuring and the plan was announced publicly to all the shareholders on 2 June 2022. The company has a year end of 30 June 2022.
The following costs will be incurred:
Implementation costs R200 000
Future Operating Losses R 50 000
Advertising R 25 000
REQUIRED: Discuss with reference to IAS37 whether the restructuring can be recognized as a provision. Indicate the amount at which it can be recognised?

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