Document ID: chunk:federal_register_of_legislation:F2023C00419:body:0:p26
Version: federal_register_of_legislation:F2023C00419
Segment Type: other
Provision Reference: 
Character Range: 66564–69299

the filters). However, an obligation might arise to pay fines or penalties under the legislation because the obligating event has occurred (the non-compliant operation of the factory).
An outflow of resources embodying economic benefits in settlement – Assessment of probability of incurring fines and penalties by non-compliant operation depends on the details of the legislation and the stringency of the enforcement regime.
Conclusion – No provision is recognised for the costs of fitting smoke filters. However, a provision is recognised for the best estimate of any fines and penalties that are more likely than not to be imposed (see paragraphs 14 and 17–19).

Example 7  Staff retraining as a result of changes in the income tax system
The government introduces a number of changes to the income tax system. As a result of these changes, an entity in the financial services sector will need to retrain a large proportion of its administrative and sales workforce in order to ensure continued compliance with financial services regulation. At the end of the reporting period, no retraining of staff has taken place.
Present obligation as a result of a past obligating event – There is no obligation because no obligating event (retraining) has taken place.
Conclusion – No provision is recognised (see paragraphs 14 and 17–19).

Example 8  An onerous contract
[Deleted]

Example 9  A single guarantee
[Deleted]

Example 10  A court case
After a wedding in 20X0, ten people died, possibly as a result of food poisoning from products sold by the entity. Legal proceedings are started seeking damages from the entity but it disputes liability. Up to the date of authorisation of the financial statements for the year to 31 December 20X0 for issue, the entity's lawyers advise that it is probable that the entity will not be found liable. However, when the entity prepares the financial statements for the year to 31 December 20X1, its lawyers advise that, owing to developments in the case, it is probable that the entity will be found liable.
(a) At 31 December 20X0
Present obligation as a result of a past obligating event – On the basis of the evidence available when the financial statements were approved, there is no obligation as a result of past events.
Conclusion – No provision is recognised (see paragraphs 15 and 16). The matter is disclosed as a contingent liability unless the probability of any outflow is regarded as remote (paragraph 86).
(b) At 31 December 20X1
Present obligation as a result of a past obligating event – On the basis of the evidence available, there is a present obligation.
An outflow of resources embodying economic benefits in settlement – Probable.
Conclusion – A provision is recognised for