The correct answer is:
|
|
Create a provision |
Disclose by note only |
No action |
|
Issue 1 |
x |
|
|
|
Issue 2 |
|
x |
|
A provision is required for the warranties sold, it should be calculated using the expected value approach. 2 is a contingent liability because it is possible that the company will have to pay out, if it was probable, then a provision would be required. If it was remote, no disclosure would be needed.
