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

Ganga Pharma Ltd. discusses Ind AS 37 terminology with its auditors. Which statement correctly reflects how the Standard uses the term 'contingent'?

Within Ind AS 37, 'contingent' describes liabilities and assets that are not recognised because their existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the entity's control. Provisions are uncertain in timing or amount but are still recognised.

  1. AIt applies to all provisions, because every provision is recognised only when an uncertain future event occurs
  2. BIt is used for liabilities and assets not recognised because their existence will be confirmed only by uncertain future events not wholly within the entity's controlCorrect
  3. CIt is used only for assets whose amount cannot be measured
  4. DIt is used for any liability for which settlement is expected to be after twelve months

Explanation

Para 12 says that although provisions are uncertain in timing or amount, 'contingent' within the Standard is used for liabilities and assets not recognised because existence will be confirmed only by uncertain future events not wholly within the entity's control. The first option wrongly applies the term to provisions, and the others invent definitions.

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