CA Final · Financial Reporting · Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

A reviewer states that, in a general sense, all provisions are contingent because they are uncertain in timing or amount. Hari Steels Ltd's accountant therefore proposes to label every provision as a contingent liability and keep it off the balance sheet. Which statement correctly reflects Ind AS 37?

The accountant is wrong. Although provisions are uncertain in timing or amount, Ind AS 37 uses 'contingent' only for items not recognised, namely those confirmed by uncertain future events outside the entity's control and liabilities failing the recognition criteria. Provisions meeting the criteria are recognised as liabilities.

1. AThe accountant is right, since every provision is uncertain and so must be treated as contingent
2. BWithin the Standard, the term 'contingent' is reserved for liabilities and assets not recognised because their existence will be confirmed only by uncertain future events not wholly within the entity's control, and also for liabilities that fail the recognition criteria; provisions meeting the criteria are recognisedCorrect
3. CProvisions are contingent only if their amount is estimated as a range
4. DThe term contingent applies only to assets, never to liabilities