Reference no: EM132969610

In the year ended 30 September 2019 Amber Ltd set up a provision for £600,000 relating to expected redundancy costs arising from the proposed closure of Division D In November 2019 it was determined that no redundancy costs would now be needed, as alternative employment had been found for the employees of Division D. However, retraining and relocation costs of £150,000 were incurred.

Problem 1: What is the correct accounting treatment for the provision and retraining / relocation costs in the financial statements for the year ended 30 September 2020 (both amounts are considered material)?

A Charge the retraining/relocation costs to the provision and then release the balance on the provision to the statement of profit or loss - no special disclosure required.

B Release the provision to the statement of profit or loss and charge the retraining / relocation costs to the statement of profit or loss - no special disclosure required.

C As for A, and disclose the net charge separately on the face of the statement of profit or loss or in the notes

D As for B, and disclose the two amounts separately on the face of the statement of profit or loss or in the notes