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Contingent assets
Identify whether each of the following would be a liability, a provision or a contingent liability, or none
of the above, in the financial statements of company A as at its balance date of 30 June 20X5. Assume that
company As financial statements are authorized for issue on 24 August 20X5
a. An amount of 35 000 owing to company Z for services rendered during May 20X5.
b. Longservice leave, estimated to be 500 000, owing to employees in respect of past services.
c. Costs of 26 000 estimated to be incurred for relocating employee D from company As head office
location to another city. The staff will physically relocate during July 20X5.
d. Provision of 50 000 for the overhaul of a machine. The overhaul is needed every 5 years and the
machine was five years old as at 30 June 20X5.
e. Damages awarded against Company A resulting from a court case decided on 26 June 20X5. The judge
has announced that the amount of damages will be set at a future date, expected to be in September
20X5. Company A has received advice from its lawyers that the amount of the damages could be
anything between 20 000 and 7 million.
a. A company is currently a tenant of a property and is due to vacate it in five years time. There is a clause in
the tenancy relating to dilapidation work which must be undertaken before the property is vacated. In
addition, there is also a clause which enables the landlord to recharge the tenant for costs related to
repairing the fabric of the building. In this regard, the landlord is intending to replace the cladding on the
building and is obtaining quotes for this work.
b. An enterprise in the oil industry causes contamination but cleans up only when required to do so under the
laws of the particular country in which it operates. One country in which it operates has had no legislation
requiring cleaning up, and the enterprise has been contaminating land in that country for several years. At
31 December 2000 it is virtually certain that a draft law requiring a leanup of land already contaminated
will be enacted shortly after the year end.
1) Determine whether the following costs should be included or excluded when measuring the
restructuring provision. Give reasons
8. Doggy-Style (Going Deep Inside)
9. Time to Swallow