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+--- Thread: Questions: Contingent Assets and Excess Provisions (/showthread.php?tid=9407)
Questions: Contingent Assets and Excess Provisions - exodialim - 01-22-2011
Hi guys, i need help with two questions which i'm unclear of.
1) Sage Pte Ltd intends to recognize a contingent asset of $1 million in the balance sheet in order to strengthen its balance sheet position. Explain if Sage Pte Ltd is allowed to recognize the contingent asset. If not, explain the correct treatment for the contingent asset.
2) Cilantro Pte Ltd accrued a provision for restructuring cost of $250,000 on 31 December 2010 as a result of a closure of a business segment in 2010. Eventually, in 2011, only $100,000 of restructuring costs was incurred. A massive fire took place in the company's premises in May 2011 and as a result, $150,000 worth of damages was incurred. Cilantro decided to use the remaining provision for restructuring cost to write off the damages from the fire. Evaluate Cilantro's appropriateness for the use of the provision and explain the treatment for the excess provision.
Please kindly help me out on these two questions guys, thx