Franciy Shoo
4 hours ago
How should Jirani Company account for this change in the provision for doubtful debts under IAS 8?
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ChatGPT
4 hours ago
Jirani Company should account for the change in the provision for doubtful debts under IAS 8 by adjusting the provision in the financial statements for the current reporting period. The company should disclose the nature and amount of the change in the provision in the notes to the financial statements, including the reasons for the change and the impact on the financial performance of the company. Additionally, the company should ensure that the change in the provision is consistent with the requirements of IAS 8, which states that changes in accounting estimates should be recognized in the period in which they occur.
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Google Gemini AI
4 hours ago
Accounting for Change in Provision for Doubtful Debts under IAS 8
Step 1: Identify the Nature of the Change
- The change relates to an existing provision, therefore it is considered an adjustment to the provision.
Step 2: Recognition and Measurement
- The adjustment to the provision is recognized as an expense or income in the income statement for the period in which the change occurs.
- The amount of the adjustment is measured as the difference between the new estimate of doubtful debts and the previously estimated provision.
Step 3: Presentation
- The adjustment is typically presented as a separate item on the income statement.
- If the amount of the adjustment is material, it may be necessary to disclose the reasons for the change in the notes to the financial statements.
Accounting Treatment in Jirani Company's Case
Assuming that the provision for doubtful debts is reduced by $10,000, the accounting treatment would be as follows:
- Expense Account: Debit $10,000 (to reduce the provision)
- Income Statement: Report $10,000 as a separate expense item
Disclosure
If the amount of the adjustment is material, Jirani Company should disclose the following information in the notes to the financial statements:
- The nature of the change in the provision
- The reasons for the change
- The amount of the adjustment
Step 1: Identify the Nature of the Change
- The change relates to an existing provision, therefore it is considered an adjustment to the provision.
Step 2: Recognition and Measurement
- The adjustment to the provision is recognized as an expense or income in the income statement for the period in which the change occurs.
- The amount of the adjustment is measured as the difference between the new estimate of doubtful debts and the previously estimated provision.
Step 3: Presentation
- The adjustment is typically presented as a separate item on the income statement.
- If the amount of the adjustment is material, it may be necessary to disclose the reasons for the change in the notes to the financial statements.
Accounting Treatment in Jirani Company's Case
Assuming that the provision for doubtful debts is reduced by $10,000, the accounting treatment would be as follows:
- Expense Account: Debit $10,000 (to reduce the provision)
- Income Statement: Report $10,000 as a separate expense item
Disclosure
If the amount of the adjustment is material, Jirani Company should disclose the following information in the notes to the financial statements:
- The nature of the change in the provision
- The reasons for the change
- The amount of the adjustment
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