Liabilities Which Fail the Recognition Criteria and Where the Possibility

question 13

Multiple Choice

Liabilities which fail the recognition criteria and where the possibility of an outflow is remote should:

• A) be recognised as an accrual
• B) be recognised as a provision
• C) be recognised as a contingent liability
• D) not be recognised in the financial statement at all

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Definitions:

Employee Leasing

A business arrangement where a company contracts with a third-party firm to handle the administration, recruitment, and training of staff, effectively leasing the employees from the third party.

Trade Agreement

A formal arrangement between two or more countries to regulate tariffs, trade barriers, and other trade-related issues.

NAFTA

The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States that established a trilateral trade bloc in North America.

GATT

The General Agreement on Tariffs and Trade, a legal agreement between countries to promote international trade by reducing or eliminating trade barriers such as tariffs and quotas.