Entity Y plans the conversion to IFRS with a reporting date of December 31, 2010
ID: 2339806 • Letter: E
Question
Entity Y plans the conversion to IFRS with a reporting date of December 31, 2010, and a transition date of January 1, 2009. During 2006, a lawsuit was filed. The filing party claims to have been injured by one of Entity Y's products and wants a compensation payment of €5,000. As of December 31, 2008, Entity Y's lawyer estimated a risk of €1,000, and Entity Y recognized a provision in its local GAAP financial statements in the same amount. During 2010, the judge decided that compensation payment will be €4,000. What is the correct amount for the provision in the IFRS opening balance sheet?
€1,000
€5,000
Explanation / Answer
As per IAS 37.14, a provision shall be recognized if and only if:
Therefore, the correct amount of provision in the IFRS opening balance sheet shall be Euros 1000.
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