For which of the following areas a provision may be recognized in the financial statement?

Question

Quizplus · Accepted Answer

Provisions can be recognized in financial statements for liabilities that are present obligations arising from past events, and where it is probable that an outflow of economic benefits will be required to settle the obligation. Warranties meet this criteria as they are a present obligation arising from the sale of goods and services in the past and it is probable that some of the goods or services will require repair or replacement. The other options, possibility of war, business recession, and strike, do not meet the criteria for recognition of a provision as they are not present obligations arising from past events.

For Which of the Following Areas a Provision May Be