Page 24 - CIMA May 18 - MCS Day Tasks

CIMA MAY 2018 – MANAGEMENT CASE STUDY

TASK 2 – PROVISIONS

Trigger and task

You receive the following email

From: Sebastian Cohard (Chief Financial Officer)

To: Finance Manager

Subject: Accounting for provisions

I am sure you are aware that a Menta bus was recently involved in a road accident. Menta goes to
considerable lengths to ensure that it complies with all legal requirements relating to the
operation of its bus services, including training of drivers, having adequate insurance, ensuring
that all buses are roadworthy and that they meet current legal requirements.

The board of directors of Menta have asked me to look into possible reasons for inclusion of
provisions and other related items within the Menta consolidated financial statements as a result
of the reported accident.

To save me some time before the next directors’ board meeting early next week, could you
summarise the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets
and apply those requirements to the consequences of the road accident?

Please provide this information to me before the end of this week.

Prepare a response to Sebastian’s request. (45 minutes)

40 KAPLAN PUBLISHING