Current Issue- Credit Crunch - Do Company Need to Do Provision?

[ncl_123]

Do company need to do provision during credit crunch?

Plz help..

[dragoon_alex]

In the current issue the IAS 37 had changed which is using non-financial libility instead of provision.

[ncl_123]

How about answering this sitting?

[dragoon_alex]

Depend on come as which question.

If it's come as a general accounting stand question them we still apply the old method; however, if come as a theory question, we need discuss the new approach.

[ncl_123]

Depend on come as which question.

If it's come as a general accounting stand question them we still apply the old method; however, if come as a theory question, we need discuss the new approach.
where can i get the relevant material for the new approach? how shall i spell out the new approach?

Old approach - IAS 37:
- when entity has a present obligation arising out a past event
- there is a probable future outflow of economic benefits
- the outflow can be estimate reliability
---> the provision would be recognized as a LIABILITY in the statement of position, with corresponding entry to income statement.

[dragoon_alex]

The ED amendment to IAS 37 which is introduce the non-finanical liabilities, instead of provision.

For example A Ltd had a legal claim against for 20m and it's only 25% chance will be found liable, in the new standard it will be record at 5m ( 20m x 25%) in non-financial liabilities in balance sheet.