1. In May 2016, Bruno Plc (which prepares financial statements to 31^st December) guaranteed a Ghs100,000 bank loan provided to Nora Ltd. Nora Ltd was in a strong financial position at 31^st December 2016, but this had worsened by 31^st December 2017 and it seemed likely on that date that Bruno plc would be required to honor its guarantee.

Explain how this guarantee should be treated in the financial statements of ABC Plc at 31^st December 2016 and 2017.

In which of the following circumstances might a provision be recognised?

a) On 13 December 2015 the board of an entity decided to close down a division. The accounting date of the company is 31 December. Before 31 December 2015 the decision was not communicated to any of those affected and no other steps were taken to implement the decision.

(b) The board agreed a detailed closure plan on 20 December 2015 and details were given to customers and employees.

(c) A company is alleged to incur cleanup costs for environmental damage (that has already been caused).

(d) A company intends to carry out future expenditure to operate in a particular way in the future.