Question

In week 6 case, Anne triggered a cancellation clause on a champagne contract. A payment of $60,000 was made and expensed on January 2nd,20X8, nothing was recorded in 20x7. What was the issue? What was the standard used to explain this? What was the conclusion?

A) A: Expense recognition, B: IFRS 9; C: IAS 37, D: Timing discrepancy
B) A: Timing discrepancy, B: Expense recognition; C: IFRS 9, D: IAS 37
C) A: IAS 37, B: Timing discrepancy; C: IFRS 9, D: Expense recognition
D) A: IFRS 9, B: IAS 37; C: Expense recognition, D: Timing discrepancy

Answer 1

The problem regards a timing discrepancy in the recognition of an expense due to the cancellation clause being triggered in the prior accounting period, which should have been recorded according to IAS 37. Option C is the correct answer.

Step-by-step explanation:

The issue in the case presented is related to the incorrect timing of expense recognition. According to accounting principles and standards, expenses should be recognized in the period in which they are incurred. In this scenario, Anne triggered the cancellation clause in 20X7, so the related expense should have been recorded in that year.

The standard used to explain this issue would be IAS 37, which pertains to Provisions, Contingent Liabilities and Contingent Assets. This standard guides how to account for certain types of expenses and liabilities. IFRS 9, on the other hand, deals with financial instruments and would not be relevant to this case.

The correct conclusion is option C: A: IAS 37, B: Timing discrepancy; C: IFRS 9, D: Expense recognition. It emphasizes that IAS 37 is the applied standard, that there was a timing discrepancy in recognizing the expense, and that this recognition is an important consideration.