Skip to content

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

Bharat Pumps Ltd has a present obligation from a past event and an outflow is probable, but, due to the nature of the matter, no sufficiently reliable estimate of the amount can be made. How should it be classified under Ind AS 37?

It is a contingent liability. Ind AS 37 includes within contingent liabilities present obligations that fail the recognition criteria because a sufficiently reliable estimate of the amount cannot be made, so no provision is recognised even though an outflow is probable.

  1. AProvision, recognised at nil and disclosed in notes
  2. BProvision, measured at the maximum possible amount
  3. CContingent liability, as a present obligation not meeting the recognition criteriaCorrect
  4. DContingent asset

Explanation

Contingent liabilities include present obligations that do not meet recognition criteria because either an outflow is not probable or a sufficiently reliable estimate cannot be made. Here the estimate fails, so it is a contingent liability. Option B is wrong because a provision requires a reliable estimate.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 37 Provisions, Contingent Liabilities and Contingent AssetsFree diagnostic mock

More Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets questions