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

Consider these statements for Ind AS 37. (I) A provision is recognised for a present obligation where an outflow is probable and a reliable estimate can be made. (II) A present obligation where an outflow is not probable is a contingent liability. (III) A possible obligation is recognised as a provision if the amount can be estimated reliably. Which combination is correct?

Only statements I and II are correct. Provisions are present obligations with a probable outflow and a reliable estimate, and present obligations without a probable outflow are contingent liabilities. A possible obligation is never recognised as a provision merely because it can be estimated.

  1. AI, II and III are all correct
  2. BI and III only are correct
  3. CII and III only are correct
  4. DI and II only are correctCorrect

Explanation

Statement I matches the definition of provisions. Statement II is correct because present obligations without a probable outflow are contingent liabilities. Statement III is wrong: a possible obligation is a contingent liability regardless of whether an estimate is available, so it is not recognised.

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