Eucalyptus Ltd has a year end of 31 March 2021. The Directors are planning to close down the company’s London office on 15 June 2021 and have provided the following information about the planned restructuring which is valid as at the year end. • The Directors have a detailed plan in place for the closure of the office on 15 June 2021 • Employees who are affected were given full information about the plans via a letter to their home address in January 2021 • The Directors can reliably estimate that it will cost them £500,000 to complete the restructuring How would this be treated in the financial statements for the year ended 31 March 2021? a) A restructuring provision would be recognised b) The London office would be shown as a discontinued operation on the face of the Income Statement c) Nothing would be recognised or disclosed because not all the relevant conditions are satisfied d) A contingent liability may be disclosed in the notes to the financial statements, but no provision should be recognised Which is the correct option and why ?
Eucalyptus Ltd has a year end of 31 March 2021. The Directors are planning
to close down the company’s London office on 15 June 2021 and have
provided the following information about the planned restructuring which is valid as at the year end.
• The Directors have a detailed plan in place for the closure of the office
on 15 June 2021
• Employees who are affected were given full information about the
plans via a letter to their home address in January 2021
• The Directors can reliably estimate that it will cost them £500,000 to
complete the restructuring
How would this be treated in the financial statements for the year ended 31 March 2021?
a) A restructuring provision would be recognised
b) The London office would be shown as a discontinued operation on the
face of the Income Statement
c) Nothing would be recognised or disclosed because not all the relevant
conditions are satisfied
d) A
statements, but no provision should be recognised
Which is the correct option and why ?
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