CERTYNEX IFRS ACADEMY

On 18 December 20X5, Ferlac's board decides to provide free replacement of a series of water heaters, beyond the warranty. The customers concerned are informed only by a letter dated 12 January 20X6. Is there a constructive obligation at 31 December 20X5?

Yes, as from the board's decision of 18 December.

No, because the decision was not communicated to customers before the reporting date.

Yes, because the letter of 12 January has retroactive effect to the date of the decision.

No, because only a legal obligation can arise from a free replacement.