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Question
Good Gloves Sdn Bhd is a glove manufacturing company.
(a) On 13 December 2020 the board of director decided to close down a division. The accounting date of the company is 31 December. Before 31 December 2020 the decision was not communicated to any of those affected and no other steps were taken to implement the decision.
(b) During 2020 the company gives a guarantee of certain borrowings of Best Gloves Sdn Bhd, whose financial condition at that time is sound. During 2021, the financial condition of Best Gloves Sdn Bhd deteriorates and at 30 June 2021 Best Gloves files for protection from its creditors.
(c) The company is obliged to incur clean-up costs for environmental damage (that has already been caused).
(d) The company intends to carry out future expenditure to operate in a particular way in the future.
Required:
Explain whether a provision is needed in respect of the above circumstances for financial year ended 31 December 2020.
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