Outside the Situation Where Specific Types of Provisions Are Covered

question 58

Multiple Choice

Outside the situation where specific types of provisions are covered in standards,a provision exists when and only when:

• A) The entity has a present legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events; and the amount or timing of the future sacrifice of economic benefits that will be made to satisfy the present obligation is uncertain.
• B) There is a legal or constructive obligation to make a future sacrifice of economic benefits within the entity as a result of past transactions or other past events, the amount or timing of which is uncertain.
• C) The entity has a present legal obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events; and the amount or timing of the future sacrifice of economic benefits that will be made to satisfy the present obligation is uncertain.
• D) The amount, timing and entity to whom the obligation to sacrifice future economic benefits as a result of a past legal or constructive obligation are unknown.

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Definitions:

Held-To-Maturity

A categorization for investments in fixed income securities that the investor intends and is able to hold until the date of maturity.

Fair Value Method

An accounting approach used to assess and report the value of certain assets and liabilities at their current market prices.

Cost Method

An accounting approach used to value inventory or investments based on the original purchase cost, without adjusting for market changes.

Foreign Exchange Rates

The value at which one currency can be exchanged for another.