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      Question

      A provision for onerous contract

      is:
      A A liability recognised when unavoidable costs exceed economic benefits under contract Correct Answer Incorrect Answer
      B A contingent asset Correct Answer Incorrect Answer
      C Treated as deferred tax only Correct Answer Incorrect Answer
      D Written off against revaluation reserve Correct Answer Incorrect Answer

      Solution

      An onerous contract is one in which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received. A provision is recognized for the present obligation under such a contract.

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