Plasticity Limited is a company manufacturing all types of plastic items. Included in their non-current assets...

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Plasticity Limited is a company manufacturing all types of plastic items. Included in their non-current assets are certain assets that require to be dismantled and removed after the end of their useful life (five years). The site will also require restoration. The company has adopted a policy of accruing for this cost as a provision on a straight-line basis over five years. The directors have indicated that this policy achieves the best matching of costs and revenue in respect of these assets. The cost is recognised in profit or loss and the provision is disclosed as a current liability. REQUIRED: Discuss whether the recognition of the provision in the financial statements of Plasticity Limited for the year ended 30 June 2023, is acceptable or not. Your answer must be in terms of International Financial Reporting Standard, IAS37, Provisions & Contingencies. Plasticity Limited is a company manufacturing all types of plastic items. Included in their non-current assets are certain assets that require to be dismantled and removed after the end of their useful life (five years). The site will also require restoration. The company has adopted a policy of accruing for this cost as a provision on a straight-line basis over five years. The directors have indicated that this policy achieves the best matching of costs and revenue in respect of these assets. The cost is recognised in profit or loss and the provision is disclosed as a current liability. REQUIRED: Discuss whether the recognition of the provision in the financial statements of Plasticity Limited for the year ended 30 June 2023, is acceptable or not. Your answer must be in terms of International Financial Reporting Standard, IAS37, Provisions & Contingencies.

Answer rating: 100% (QA)

The question revolves around the appropriateness of a provision that Plasticity Limited has made in their financial statements for the year ended 30 J... View the full answer