ACCA Strategic Professional · Strategic Business Reporting (International) · Provisions, contingencies and events after the reporting period

Delta plc's finance director asks the group accountant to omit a restructuring provision for a division the board has publicly announced it will close in March. The announcement was made in November, before the 31 December year end, and a detailed plan exists. The director argues that omitting it will help meet a profit-based bonus target. Which response is most consistent with IAS 37 and professional ethics?

The provision must be recognised for the direct costs necessarily entailed by the restructuring, because the plan was announced before year end. Future operating losses and retraining are excluded. The accountant should not yield to bonus-motivated pressure and should escalate the matter, in line with integrity and objectivity.

1. AOmit the provision because the director has authority over the financial statements
2. BRecognise the provision for direct expenditures necessarily entailed by the restructuring, and raise the matter through the entity's escalation channels if pressure continuesCorrect
3. CRecognise the provision but include future operating losses and retraining costs to be prudent
4. DDisclose the closure only as a contingent liability to avoid affecting profit