What is meant by relevant circumstances? Describe the two types of relevant circumstances.
What will be an ideal response?
ANSWER:
Relevant circumstances are economically significant circumstances that can affect broadly similar events. These economically significant circumstances are general conditions or factors associated with complex events that are expected to influence the incidence or timing of cash flows. Relevant circumstances pertain directly to the event being accounted for and influence the accounting method selected to represent that event. Those conditions known at the time of the event are referred to as present magnitudes. Factors that can be known only at a later date are called future contingencies.
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