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A local council is one year into a two year project to renovate local parks. The project is on track to be completed within the set time-scale, however it has proved more costly than initially expected.
The project is on track to be completed within its two year period. Contracts for the labour and materials needed to renovate the parks were agreed at the start of the project and no changes have arisen. Despite the fact that the council has yet to fully settle these contracts, costs are set to be as budgeted.
Why would this example not be recognised as a provision?
Suggested Answer: A
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10 comments · newest first
TA
Taryn
12 months ago
But what if unexpected costs pop up later?
LE
Leonor
12 months ago
Totally agree with A, no uncertainty means no provision needed!
GO
Goldie
1 year ago
Wait, how can they be sure about costs if contracts aren't settled yet?
VE
Verlene
1 year ago
I think option A makes the most sense here.
OR
Orville
1 year ago
Costs are within budget, that's good!
LA
Lakeesha
1 year ago
This reminds me of a practice question where we talked about obligations. I wonder if option C could be the right choice since the council isn't obligated yet.
IS
Isaac
1 year ago
I'm not entirely sure, but I think option A might be correct since the timing and amount seem clear.
EL
Elroy
1 year ago
I remember we discussed provisions in class, and I think it's because the costs are already set and there's no uncertainty about them.
CA
Carmen
1 year ago
I feel like option B could be misleading, but if the contracts are settled, then maybe there's no real outflow expected.
AR
Ardella
1 year ago
Hmm, this looks like a tricky one. I'll need to carefully read through the question and options to identify the key information.