Case studies ias 37

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Case studies ias 37

  1. 1. CASE Study 1 X LTD A manufacturer of Consumer goods offers repairwarranties for three years for the defects in certain partsspecified in the warranty details. On the basis of the pastexperience, it is probable ( i.e. more likely than not) thatthere will be some claims under the warranties.(i) Analyse the case to identify past event (obligating event).(ii) Is it a legal or constructive obligation? (iii) Does thewarranty offer satisfy the provisioning conditions set out inPara 14 of IAS 37?Case Study 2An entity that belongs to the leather industry causescontamination. The country in which it operates does nothave any environmental legislation. But a proposed lawrequires the existing damage to be rectified.There is identifiable environmental damaged caused theentity can estimate the penalty as per the proposed law.Is there any provisioning required?Case Study 3Perundevi Ltd operates in an offshore oilfield. Its licensingagreement requires it to remove the oil rig at the end of theproduction and restore the sea bed. 80% of the dismantlingcosts relate to the removal of the oil rig and restoration ofdamage caused by building it, and 20% arise through theextraction of oil. At the end of the reporting period of 2009the rig has been constructed but no oil has been extracted.Analyse the situation.
  2. 2. Case Study 4Desigar Ltd operates profitably from a factory that it hasleased taken under an operating lease. On January 1, 2009the entity relocates its operations to new factory. The easeon the old factory continues for next 4 years, it cannot becancelled and or sublet to another user.Can you analyse the case and identify the obligating event.Should the entity create provision under IAS 37?Case Study 5The Board of Directors of Bhuvanasundar Ltd has decided toclose down its chemical division as on 01 December 2008.But this decision was not communicated before the end ofthe reporting period (31 December 2008), and no othersteps were taken to implement the decision.Do you think Bhuvanasundar Ltd should consider any of itsobligation relating to the closure of the chemical division?

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