Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, when providing for a future event such as the clean-up of a construction site at the end of a long-term project, gains and other cash inflows that are expected to arise on the sale of assets related to the clean-up, must be:

Question

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Under AASB 137, gains and other cash inflows that are expected to arise on the sale of assets related to the clean-up should be measured separately from the provision for the clean-up. This is because these cash inflows do not represent probable inflows of economic benefits that can be offset against the provision. Therefore, choice C, measuring these cash inflows separately, is the best option. Choice A is incorrect because setting off the cash inflows against the provision is not appropriate. Choice B is incorrect because gains and cash inflows should not be deferred assets as they do not represent future economic benefits that will flow to the entity. Choice D is incorrect because the cash inflows should not be recognised directly in equity.

Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, When