According to IAS 37, with Respect to Onerous Contracts, a Provision

question 4

Multiple Choice

According to IAS 37, with respect to onerous contracts, a provision should be recognized for "unavoidable costs of the contract", which is:

• A) the intrinsic value of the contract.
• B) the lower of cost or market value of the contract.
• C) the lower of cost of fulfillment or the penalty from non-fulfillment of the contract.
• D) None of the above

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Definitions:

Variances

The difference between planned or expected financial outcomes and the actual results.

Direct Materials

Raw materials that directly become a part of the finished product and can be easily traced to it.

Standard Cost

A predetermined cost of manufacturing a single unit or a number of product units during a specific period under current or anticipated operating conditions.

Direct Labor Variances

The differences between the actual costs of direct labor and the standard or expected costs, used for budgeting and cost control.