Discuss the underpaid taxation shall be recognised

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Reference no: EM132551925

On 30th May 2020, Brownwell Pty Ltd reported to the Australian Taxation Office (ATO) that last year they had accidentally omitted $100,000 of revenue in their Statement of Financial Performance for the year ended 30thJune 2019. The business has yet to hear back from the ATO. This means that the business has underpaid its taxation liability bill for the year by $27,500. The manager asked you, the company accountant whether the underpaid taxation shall be recognised as a liability in the Statement of Financial Position as at 30th June 2020, or disclosed as a contingent liability in the Notes to the Financial Statements.

Required:

Question 1: Discuss whether the underpaid taxation shall be recognised as a liability in the Statement of Financial Position as at 30th June 2020, or disclosed as a contingent liability to the Notes to the Financial Statements. Justify your answer with reference to the Conceptual Framework definition and recognition criteria of a liability, and AASB 137 Provisions, Contingent Liabilities, and Contingent Assets.

Reference no: EM132551925

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