Provisions & Contingencies (IAS 37): Recognition, Expected Values & Unwinding

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Run eight year-end items of Halden Ridge Appliances through the IAS 37 decision tree with one nested IF, then total the provisions and count the contingent liabilities to disclose.
• Weight each warranty outcome by its probability, turn the expected cost per appliance into the total warranty cost for 2026 sales and deduct what has already been paid to get the year-end provision.
• Measure the distributor lawsuit: the probability that cash goes out at all, the most likely outcome with INDEX/MATCH, the expected value for comparison, and which measure IAS 37 uses here.
• Discount the three settlement instalments to the provision at 31 Dec 2026, then roll it forward with the unwinding of the discount (a finance cost) until the last payment brings it to 0.
• Measure the obligation to dismantle the paint-shop plant and restore the leased site, add it to the cost of the plant, and work out the 2026 expense: depreciation of the larger asset plus the unwinding of the provision.
• Test a fixed-price supply contract: the cost of fulfilling it with directly related costs only, the net loss of delivering, and the provision as the lower of that loss and the penalty for walking away.
• Sort the cost list for the Eastfield plant closure into what belongs in the restructuring provision, book the entry, and decide whether a plan that was only approved by the board already creates a provision.
• Complete the IAS 37 reconciliation of all five provision classes for 2026, work out the charge to operating profit and chart the year as a waterfall.