ACCA FA · Chapter 8 · Question 6 of 10
Which of the following should be recognised as a provision at the reporting date?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Costs of repairing goods sold in the year under a legally binding warranty
Explanation
A warranty given on goods already sold creates a present legal obligation from a past event (the sale), so a provision is recognised. IAS 37 prohibits provisions for future operating losses. Planned training and refurbishment relate to future actions that the company can still avoid, so there is no present obligation.
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