If the Unavoidable Costs of Completing a Purchase Commitment Are

question 18

Multiple Choice

If the unavoidable costs of completing a purchase commitment are higher than the expected benefits from receiving the contracted goods or services, IFRS requires a loss provision to be recognized. This is known as a(n)

• A) executory contract.
• B) purchase commitment.
• C) onerous contract.
• D) impaired contract.

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Definitions:

Present Values

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Compounded Annually

Refers to the calculation of interest where the amount is added to the principal at the end of each year, affecting the total interest over time.

Present Value

The market value now of a future financial amount or cash flows, factoring in a specific rate of gain.

Withdrawals

The act of removing funds from a bank account or investment vehicle.