This document contains 5 case studies related to accounting for provisions under IAS 37. Case Study 1 involves a manufacturer that provides a 3-year repair warranty for certain product parts. Case Study 2 involves an entity that has caused environmental damage prior to the existence of legislation requiring cleanup. Case Study 3 involves an oil rig that will require dismantling and seabed restoration. Case Study 4 involves a factory lease that continues for 4 years after relocating operations. Case Study 5 involves a decision to close a chemical division that was not communicated before the reporting period ended.

1. CASE Study 1
X LTD A manufacturer of Consumer goods offers repair
warranties for three years for the defects in certain parts
specified in the warranty details. On the basis of the past
experience, it is probable ( i.e. more likely than not) that
there 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 the
warranty offer satisfy the provisioning conditions set out in
Para 14 of IAS 37?
Case Study 2
An entity that belongs to the leather industry causes
contamination. The country in which it operates does not
have any environmental legislation. But a proposed law
requires the existing damage to be rectified.
There is identifiable environmental damaged caused the
entity can estimate the penalty as per the proposed law.
Is there any provisioning required?
Case Study 3
Perundevi Ltd operates in an offshore oilfield. Its licensing
agreement requires it to remove the oil rig at the end of the
production and restore the sea bed. 80% of the dismantling
costs relate to the removal of the oil rig and restoration of
damage caused by building it, and 20% arise through the
extraction of oil. At the end of the reporting period of 2009
the rig has been constructed but no oil has been extracted.
Analyse the situation.

2. Case Study 4
Desigar Ltd operates profitably from a factory that it has
leased taken under an operating lease. On January 1, 2009
the entity relocates its operations to new factory. The ease
on the old factory continues for next 4 years, it cannot be
cancelled 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 5
The Board of Directors of Bhuvanasundar Ltd has decided to
close down its chemical division as on 01 December 2008.
But this decision was not communicated before the end of
the reporting period (31 December 2008), and no other
steps were taken to implement the decision.
Do you think Bhuvanasundar Ltd should consider any of its
obligation relating to the closure of the chemical division?