Evaluate Whether the Following Situations Will Give Rise to a Present

question 6

Multiple Choice

Evaluate whether the following situations will give rise to a present obligation: I -Bona Bay Ltd is a large manufacturer of surfboards and provides a two year warranty for all it products from the time of purchase by offering to repair or replace the item.
II - Sea Eagle Ltd operates its offshore oil rigs near Curlew Beach.During the reporting period,there was a major oil spill and the company had publicly announced to undertake clean-up of all the contamination that it caused.There is no environmental legislation on oil spills.
III-A customer sued Neck Bay Ltd for damages from a faulty product.The company hired a legal team to dispute this claim.
IV - Whitehaven Ltd had guaranteed a bank loan to an associated company.
In compliance with AASB 137 "Provisions,Contingent Liabilities and Contingent Assets",which of the above situations requires recognition in the financial statements?

• A) I, II and III;
• B) I and II
• C) II and III
• D) III and IV
• E) None of the given answers