IAS 37

1. A provision is a liability
a. of uncertain timing but certain amount
b. of uncertain timing or amount
c. of certain timing but uncertain amount
d. none of these
2. A provision is the same as an accrual.
a. True
b. False
3. Provisions are reported as part of trade and other payables in the financial statements.
a. True
b. False
4. Where is a contingent liability contained in the financial statements?
a. As a non-current liability
b. A current liability
c. In equity
d. A note to the financial statements
5. A contingent asset is one where ______ obligation will arise from past events, which will be confirmed by
events in the future.
a. a possible
b. a probable
c. an uncertain
d. a definite
6. Pools Plc. wishes to create a provision for future operating losses. Is this allowed under IAS 37?
a. Yes
b. No
7. Gains from the expected disposal of assets may be taken into account when measuring a provision.
a. True
b. False
8. Which of the following does not create a constructive obligation under IAS 37?
a. Established pattern of past practice
b. Legislation
c. Published policies
d. A current statement
9. Contingent assets should be recognised in the financial statements when they are…
a. Possible
b. Probable
c. Definite
d. Received
10. When another party will reimburse some or all of the expenditure required to settle a provision, the
reimbursement should be recognised…
a. as a deduction against the provision
b. as a separate line in equity
c. as a separate asset
d. as a note to the financial statements
11. 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:
a. 50% of the expected amount of the payments
b. The expected amount of the payments
c. An amount agreed upon by management
d. The entire amount of the sales in the period
12. The amount of a provision shall be the _________ of the expenditures expected to be required to settle the
obligation.
a. Market value
b. Fair value
 c. Cost value
d. Present value
13. 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?
a. Yes
b. NO
14. Under IAS 37 a ‘probable transfer of resources’ when referring to a provision means…
a. Possible
b. More likely than not
c. Almost certain
d. Definite
15. 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…
a. Probable
b. Virtually certain
c. Possible
d. More probable than not
16. Which of the following is not a disclosure requirement for a contingent liability?
a. Exact timing of outflow
b. Indication of uncertainties relating to the amount
c. Estimated financial effect
d. Possibility of any reimbursement
17. An entity may recognise a present obligation under an onerous contract as a provision.
a. True
b. False
18. Which of the following is not a restructuring cost?
a. Fundamental change in operations
b. Re-Training staff
c. Sale of a line of business
d. Change in management structure
19. Which of the following is a restructuring cost under IAS 37?
a. Relocation of staff
b. Marketing
c. Investment in new distribution networks
d. Relocation of business activities from one region to another