Question 1 of 23

Podge Limited created a provision for $100,000 against a certain event which never
materialised. During the financial year, another event costing $80,000 occurred.

May Podge Limited use part of the $100,00 provision against the new event?

 Yes
 No

Question 2 of 23
A provision for warranties should be made on the class of claims as a whole.
 True
 False

Question 3 of 23
Which of the following is a restructuring cost under IAS 37?
 Relocation of staff
 Marketing
 Investment in new distribution networks
 Relocation of business activities from one region to another

Question 4 of 23
The amount of a provision shall be the _________ of the expenditures expected to be
required to settle the obligation.
 Market value
 Fair value
 Cost value
 Present value

Question 5 of 23
An entity may recognize a present obligation under an onerous contract as a provision.
 True
 False

Question 6 of 23
Pools Plc. wishes to create a provision for future operating losses. Is this allowed under
IAS 37?
 Yes
 No

Question 7 of 23
Gains from the expected disposal of assets may be taken into account when measuring a
provision.
 True
 False
Question 8 of 23
Contingent assets should be recognised in the financial statements when they are…
 Possible
 Probable
 Definite
 Received

Question 9 of 23
Under IAS 37 a ‘probable transfer of resources’ when referring to a provision means…
 Possible
 More likely than not
 Almost certain
 Definite

Question 10 of 23
A provision is the same as an accrual.
 True
 False

Question 11 of 23
When another party will reimburse some or all of the expenditure required to settle a
provision, the reimbursement should be recognised…
 as a deduction against the provision
 as a separate line in equity
 as a separate asset
 as a note to the financial statements

Question 12 of 23
A provision is a liability….
 of uncertain timing but certain amount
 of uncertain timing or amount
 of certain timing but uncertain amount
 none of these

Question 13 of 23
Which of the following does not create a constructive obligation under IAS 37?
 Established pattern of past practice
 Legislation
 Published policies
 A current statement

Question 14 of 23
If an entity has a warranty obligation and expects, with more than 50% probability, it will
result in some payments from the entity, a provision should be made for:
  50% of the expected amount of the payments
 The expected amount of the payments
 An amount agreed upon by management
 The entire amount of the sales in the period

Question 15 of 23
When a restructuring involves the sale of an operation, at what point may an obligation
arise under IAS 37?
 When business is marketed for sale
 When a preferred buyer is located
 When an expression of interest is filed
 When a binding sale agreement is executed

Question 16 of 23
An entity may avoid disclosure requirements if they expect it would seriously prejudice
the position of the entity in dispute with other parties.
 True
 False

Question 17 of 23
The cost of major overhauls of assets such as ships may be provisioned over a number
of years prior to the overhaul.
 True
 False

Question 18 of 23
Where is a contingent liability contained in the financial statements?
 As a non-current liability
 A current liability
 In equity
 A note to the financial statements

Question 19 of 23
Which of the following is not a restructuring cost?
 Fundamental change in operations
 Retraining staff
 Sale of a line of business
 Change in management structure

Question 20 of 23
A contingent asset is one where ______ obligation will arise from past events, which will
be confirmed by events in the future.
 a possible
 a probable
  an uncertain
 a definite

Question 21 of 23
When another party will reimburse some or all of the expenditure required to settle a
provision, the reimbursement should only be recognised when its receipt is…
 Probable
 Virtually certain
 Possible
 More probable than not

Question 22 of 23
Provisions are reported as part of trade and other payables in the financial statements.
 True
 False

Question 23 of 23
Which of the following is not a disclosure requirement for a contingent liability?
 Exact timing of outflow
 Indication of uncertainties relating to the amount
 Estimated financial effect
 Possibility of any reimbursement