Provision

Provision for warranty claim
Matters to consider : ( J U D G E )

1. J udgement to director
~ high risk cos dependent on director own judgement
2. U nder/ over provision in previous year
~ any subsequent adjusment use to manipulating to recognise of profit
3. D efinition
~ whether they met the definition of provision
## E stimate realiable amount of obligation
## P robable economic outflow
## P resent obligation (legal or constructive) result fr. past event
4. G eneral insurance
~ any insurance can mitigate the effect of the claim
5. E xistence & reason for the claim
~ adequate of current provision & need to consider valuation of stock held

Basis calculation of provision reasonable in the light of prior experience & consistent?

Evidence

R ecords
1. Warranty card / agreement (Insurance)
2. insurance policy
~ obtain/establish posibbilities of any lossess covered
3. legal correspondence
~ review / determine the status of ongoing claim
4. warranty terms
~ review to establish co have obligation to compensate under which circumstance

A ccuracy
1. R eview level of claim after year end
2. C alculation of provision
~ check for accuracy
3. Basis of calculation
~ discuss with director the basis/methods applied whether is consistent & reasonable

A nalytical Review
~ Compare previous year provision & assess the accuracy of previous yr provision to actual claim made