ACC309 Quiz on Current Liabilities (Theories) 

Which statement is incorrect where the expenditure required to settle a provision is

expected to be reimbursed by another party? 
a. In the income statement, the expense relating to the provision may be presented net of the
reimbursement. 
b. The amount of the reimbursement shall not exceed the amount of the provision. 
c. The reimbursement shall not be treated as separate asset but "netted against the estimated
liability for the provision. 
d. The reimbursement shall be recognized only when it is virtually certain that the
reimbursement would be received if the entity settles the obligation 
Which statement is NOT true in relation to the measurement of a provision?
a. The risks and uncertainties that inevitably surround many events and circumstances shall
be taken into account in reaching the best estimate of a provision. 
b. Where the effect of the time value of money is material, the amount of a provision shall
be the present value of the expenditure expected to settle the obligation 
c. Gains from expected disposal of assets shall be taken into account in measuring a
provision. 
d. Future events that may affect the amount required to settle the obligation shall be
reflected in the amount of the provision where there is sufficient objective evidence that
the future events will occur. 
Provisions shall be discounted if the effect of the time value of money is material. Which of
the following is INCORRECT regarding the discount rate? 
a. Reflects current market assessment of the time value of money 
b. Does not reflect risks for which future cash flow estimates have been adjusted
c. Is a post-tax discount rate 
d. Reflects risks specific to the liability