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CA Final Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets — practice questions — page 2

Explore 42 free Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets questions in CA Final Financialreporting. Open each question or exercise to read its content, reference answers and available explanation.

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Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets questions and exercises with answers

Showing questions 31–42 of 42.

A company has given a financial guarantee on a group loan. How is this classified?Read the answer and worked solution →The likelihood of loss on a contingency is described as probable, reasonably possible, or what?Read the answer and worked solution →Where may the nature and extent of contingent liabilities be described?Read the answer and worked solution →An asset retirement obligation under IAS 37 is called what?Read the answer and worked solution →An ARO liability is initially measured at the present value of what?Read the answer and worked solution →When an ARO is first recognized, an asset equal to the initial liability is what?Read the answer and worked solution →Under IAS 37, when an ARO discount rate changes, the present value is recalculated and what is adjusted?Read the answer and worked solution →Tanks costing $15,000 to remove today rise 2.5% a year for 40 years. The future cost is about what?Read the answer and worked solution →A $40,275.96 cost due in 40 years is discounted at 9%. The present value is about what?Read the answer and worked solution →Recognizing an ARO raises both assets and liabilities. What happens to the debt-to-equity ratio?Read the answer and worked solution →Taking one large one-time charge to lower future expenses is known as what?Read the answer and worked solution →A write-down of inventory in a big bath has what impact on cash?Read the answer and worked solution →

Worked practice questions

A company has given a financial guarantee on a group loan. How is this classified?

  1. Contingent liability
  2. Provision for tax
  3. Equity reserve
  4. Contingent asset
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Correct answer: A. Contingent liability

Payment arises only if the borrower defaults, which is a future uncertain event, so the guarantee is a contingent liability.

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The likelihood of loss on a contingency is described as probable, reasonably possible, or what?

  1. Remote
  2. Certain
  3. Assured
  4. Booked
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Correct answer: A. Remote

The three likelihood bands for a loss are probable, reasonably possible and remote.

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Where may the nature and extent of contingent liabilities be described?

  1. In a footnote
  2. In share capital
  3. In cash flow totals
  4. In revenue figures
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Correct answer: A. In a footnote

Contingent liabilities are not recorded in the accounts, so a footnote to the balance sheet may describe them.

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More Financialreporting topics

Ind AS 116 LeasesInd AS 36 Impairment of Assets and Ind AS 38 Intangible AssetsInd AS 24 Related Party Disclosures and Ind AS 108 Operating SegmentsInd AS 1 Presentation of Financial StatementsInd AS 12 Income TaxesInd AS 113 Fair Value MeasurementInd AS 109 Financial InstrumentsInd AS 23 Borrowing Costs and Ind AS 40 Investment Property