What is Exit or disposal costs?
In short
Costs of an exit or disposal activity, such as closing a plant, are recognized as a liability at fair value when they are incurred, not when management commits to the plan.
Key takeaways
- One-time termination benefits are recognized when communicated to employees, or over the future service period if employees must work beyond the minimum retention period.
- Costs to end a contract early are recognized when the contract is terminated.
- Relocation and similar costs are recognized when incurred.
Where it's tested
FAR: Current Liabilities, Contingencies & Commitments — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A loss contingency is probable and estimated within a range of $200,000 to $500,000, with no amount in the range a better estimate than any other. Under US GAAP, what amount is accrued?