ABC Ltd is a large company that consists of many divisions. The toy division was not operating effectively so management has decided to restructure the Toy division. It will combine the toy division with the clothes division.

Management created a detailed, formal plan for restructuring and the plan was announced publicly to all the shareholders on 2 June 2022. The company has a year-end of 30 June 2022.

The following costs will be incurred:

Implementation costs R200 000

Future Operating Losses R 50 000

Advertising R 25 000

REQUIRED:

Discuss with reference to IAS37 whether the restructuring can be recognized as a provision. Indicate the amount at which it can be recognized?

Answer rating: 100% (QA)

In accordance with International Accounting Standard 37 IAS 37 Provisions Contingent Liabilities and Contingent Assets restructuring costs can be reco... View the full answer