Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the Appropriate

question 10

Multiple Choice

Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the appropriate accounting treatment for future operating losses is to:

• A) determine a reasonable estimate of the future losses and recognise as a provision.
• B) determine the future losses and charge them directly against retained earnings.
• C) not recognise such items in the financial statements.
• D) determine the future losses and discount them to present value.

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Definitions:

Critical Values

Specific points on a statistical distribution that are used to decide whether to reject the null hypothesis in hypothesis testing.

Materials Account

An account used to track the cost of raw materials that are bought and used during production processes.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company’s balance sheet.

Labour Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, often used to assess workforce productivity.