Measurement and Recognition of AASB137 Provisions

Running Head: FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

1FINANCIAL ACCOUNTING
Table of Contents
Introduction...............................................................................................................................2
Measurement and Recognition Requirement of AASB137 Provisions.......................2
Recognition of Provisions...............................................................................................3
Recognition of Contingent Liabilities............................................................................4
Recognition of Contingent Assets.................................................................................4
Measurement...................................................................................................................5
Company’s disclosure of measurement and Recognition of AASB137 Provisions. .6
Conclusion................................................................................................................................8
Reference.................................................................................................................................9

2FINANCIAL ACCOUNTING
Introduction
The aim of the assignment is the analysis of the areas in relations to liabilities
including provisions and contingent liabilities (excluding liability of lease) in relation to
Woolworths Group. This company is one of the major company of Australia with the
extensive interest in retail throughout the Australia as well as New Zealand. Woolworths
Group is considered the second largest company in the Australia by total revenue1. The
discussion will include the discussion regarding requirements of measurement and
recognition of the relevant accounting standard of AASB137 Provisions, contingent liabilities
and contingent assets. Moreover, the discussion will also include whether the measurement
and recognition disclosure provided by the company that in compliance with the relevant
accounting standard.
Measurement and Recognition Requirement of AASB137 Provisions
The accounting standard AASB 137 regarding provisions, contingent liabilities and
contingent assets ensures the appropriateness of the recognition criteria as well as
contingent liabilities which are applied to the provisions, contingent liabilities and contingent
assets as well as the disclosure of the sufficient information in notes for enabling the users
for understanding their nature, amount and timing. This standard is applied to all the entities
in the accounting for the provisions, contingent liabilities as well as the contingent liabilities
for those which results from the executory contracts which is except where there is onerous
contracts as well as to those which is covered by the other Australian Accounting Standard2.
According to the AASB 137 accounting standard, contingent assets is defined as the
possible assets that arises from the events of past as well as the existence of whom depend
upon the occurrences or the non-occurrences of the future events of one or more, not
1 Woolworthsgroup.com.au. (2019). [online] Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed 10 May 2019].
2 Adhariani, D., Sciulli, N. and Clift, R., 2017. Quantitative Optimisation Model, Results and Discussion.
In Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective (pp. 209-
284). Palgrave Macmillan, Cham.

3FINANCIAL ACCOUNTING
wholly within the entity’s control. However, the contingent liability is concerned with the
possible obligations which arises from the events of past as well as whose existence
depends upon the occurrences of the uncertain future events of one or more, that is not
wholly within the entity’s control. In addition, the obligation if present arises but is not
recognized because there is no probability that the resources outflow embodying the benefit
of economy will be required for settle down the obligations and the obligation’s amount will
not be measured by the sufficient reliability3.
Recognition of Provisions
According to AASB 137, the provisions will be recognized in the following situations:
 Because of past event, there are present obligations (constructive or legal) of the
entity.
 There is the probability of the resources outflow embodying the requirement if
economy benefits for setting the obligations.
 Estimation of the obligation’s amount can be made reliability.
However, in the absence of these conditions, there will be no recognition of provisions.
The event is known as the obligating event when it creates the obligation of
constructive or legal, which results in having no realistic alternative in the entity but to settle
down the obligation. The arising of the constructive obligations occur when the past
practices creates the expectation that is valid on the part of third party such as the retail
store that has the policy of long standing for allowing the customers for returning
merchandise within the period of 30 days. Moreover, the contingent liability or the possible
obligation is disclosed but it is not accrued. However, if the payment is not remote,
disclosure will not be required4.
3 Aasb.gov.au. (2019). [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-
04_COMPjun14_04-14.pdf [Accessed 10 May 2019].
4 Aasb.gov.au. (2019). [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-
04_COMPjun14_04-14.pdf [Accessed 10 May 2019].