RSM220H1 : rsm220 case draft

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According to, ias37-28, an entity shall not recognize a contingent liability . Based on these guidelines, we could treat these fees as a contingent liability because their existence will be confirmed by uncertain future events. Hence, the million will be stated on the balance sheet as cash equivalent. This treatment will not lead to an increase in liability; however, the money put aside will be taken as cash equivalent and will result in increased liquidity position. Alternative 2: treat the money put aside as restricted cash. According to ias7-48, an entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the group. This clause suggests that the money put aside should be treated and disclosed as. Restricted cash which will show up as a long term asset of on the balance sheet.

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