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3 days ago · To help remove some of the mystery behind accounting language, this article will provide definitions and explanations for some of the most common Accounting Terms & Phrases. With this guide, you’ll better understand financial statements, reports, and conversations about your finances.
- Objective
- Scope
- Key DeFINITions
- Recognition of A Provision
- MeaSureMent of ProViSions
- ReMeaSureMent of ProViSions
- ReStrucTurIngs
- What Is The Debit Entry?
- Use of ProViSions
- Contingent LiABilITies
The objective of IAS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The key...
IAS 37 excludes obligations and contingencies arising from: [IAS 37.1-6] 1. financial instruments that are in the scope of IAS 39 Financial Instruments: Recognition and Measurement (or IFRS 9 Financial Instruments) 2. non-onerous executory contracts 3. insurance contracts (see IFRS 4 Insurance Contracts), but IAS 37 does apply to ot...
Provision:a liability of uncertain timing or amount. Liability: 1. present obligation as a result of past events 2. settlement is expected to result in an outflow of resources (payment) Contingent liability: 1. a possible obligation depending on whether some uncertain future event occurs, or 2. a present obligation but payment is not prob...
An entity must recognise a provision if, and only if: [IAS 37.14] 1. a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event), 2. payment is probable ('more likely than not'), and 3. the amount can be estimated reliably. An obligating event is an event that creates a legal or constructive ...
The amount recognised as a provision should be the best estimate of the expenditure required to settle the present obligation at the balance sheet date, that is, the amount that an entity would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party. [IAS 37.36] This means: 1. Provisions for ...
Review and adjust provisions at each balance sheet dateIf an outflow no longer probable, provision is reversed.A restructuring is: [IAS 37.70] 1. sale or termination of a line of business 2. closure of business locations 3. changes in management structure 4. fundamental reorganisations. Restructuring provisions should be recognised as follows: [IAS 37.72] 1. Sale of operation:recognise a provision only after a binding sale agreement [I...
When a provision (liability) is recognised, the debit entry for a provision is not always an expense. Sometimes the provision may form part of the cost of the asset. Examples: included in the cost of inventories, or an obligation for environmental cleanup when a new mine is opened or an offshore oil rig is installed. [IAS 37.8]
Provisions should only be used for the purpose for which they were originally recognised. They should be reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources will be required to settle the obligation, the provision should be reversed. [IAS 37.61]
Since there is common ground as regards liabilities that are uncertain, IAS 37 also deals with contingencies. It requires that entities should not recognise contingent liabilities – but should disclose them, unless the possibility of an outflow of economic resources is remote. [IAS 37.86]
Your accounting system produces financial statements; such as ... Balance sheet: Financial position as of a specific date. Income statement: Profit or loss for a stated time period. Statement of cash flows: Inflows and outflows for a month or year.
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- Accounts Payable. Accounts Payable refers to the money a company owes to its creditors or suppliers for goods and services purchased on credit. It represents a liability on the company's balance sheet until payment.
- Balance Sheet. The Balance Sheet is a financial statement that provides a snapshot of a company's financial position at a specific time. It presents the company's assets, liabilities, and shareholders' equity, enabling stakeholders to assess its financial health.
- Cash Flow. Cash Flow represents the movement of cash into and out of business over a specific period. It provides insights into a company's ability to generate cash and meet its financial obligations.
- Depreciation. Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the asset's value decrease due to wear and tear, obsolescence, or other factors.
- Accounts receivable (AR) Accounts receivable (AR) definition: The amount of money owed by customers or clients to a business after goods or services have been delivered and/or used.
- Accounting (ACCG) Accounting (ACCG) definition: A systematic way of recording and reporting financial transactions for a business or organization.
- Accounts payable (AP) Accounts payable (AP) definition: The amount of money a company owes creditors (suppliers, etc.) in return for goods and/or services they have delivered.
- Assets (fixed and current) (FA, CA) Assets (fixed and current) definition: Current assets (CA) are those that will be converted to cash within one year.
Accounting estimates are defined as “monetary amounts in financial statements that are subject to measurement uncertainty”. The amendments clarify what changes in accounting estimates are and how these differ from changes in accounting policies and corrections of errors.
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Sep 23, 2022 · It arises when an entity makes a payment for goods or services in advance of receiving them. Revenue deferrals are liabilities. Deferrals shift the timing of when a company recognizes its revenue and expenses, providing for more accurate financial statements. Here’s how they work.
