On 12 April 2019, the board of directors of Ighawe Ltd formulated a plan to restructure their divisions and reorganise their operations. The plan involved redundancies of some employees and the relocation of others. The plan for restructure was announced to the employees and the public on 31 May 2019, when it was finalised, and the company commenced implementation one month later, Assets from one of the divisions that was going to be closed down were sold for a gain on disposal of R170 000. It was estimated that retrenchment costs would amount to R1 630 000 and relocation costs would be approximately R200 0D0. The relocated employees would have to be re-trained at a cost of R77 000. Required: By referring to the definition and recognition criteria for a provision in your answer, determine whether Ighawe Ltd should recognise a provision in their financial statements for the year ended 31 December 2019
On 12 April 2019, the board of directors of Ighawe Ltd formulated a plan to restructure their divisions and reorganise their operations. The plan involved redundancies of some employees and the relocation of others. The plan for restructure was announced to the employees and the public on 31 May 2019, when it was finalised, and the company commenced implementation one month later, Assets from one of the divisions that was going to be closed down were sold for a gain on disposal of R170 000. It was estimated that retrenchment costs would amount to R1 630 000 and relocation costs would be approximately R200 0D0. The relocated employees would have to be re-trained at a cost of R77 000. Required: By referring to the definition and recognition criteria for a provision in your answer, determine whether Ighawe Ltd should recognise a provision in their financial statements for the year ended 31 December 2019
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On 12 April 2019, the board of directors of Ighawe Ltd formulated a plan to restructure their divisions and reorganise their operations. The plan involved redundancies of some employees and the relocation of others. The plan for restructure was announced to the employees and the public on 31 May 2019, when it was finalised, and the company commenced implementation one month later, Assets from one of the divisions that was going to be closed down were sold for a gain on disposal of R170 000. It was estimated that retrenchment costs would amount to R1 630 000 and relocation costs would be approximately R200 0D0. The relocated employees would have to be re-trained at a cost of R77 000.
Required:
By referring to the definition and recognition criteria for a provision in your answer, determine whether Ighawe Ltd should recognise a provision in their financial statements for the year ended 31 December 2019
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