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CMA Intermediate · Corporate Accounting and Auditing · Provisions, Contingent Liabilities and Contingent Assets (Ind AS 37)

Para 12 of Ind AS 37 explains why provisions differ from contingent liabilities even though all provisions are uncertain in a general sense. Which statement reflects that para?

Within Ind AS 37, 'contingent' describes liabilities and assets not recognised because their existence will be confirmed only by uncertain future events not wholly within the entity's control. The term contingent liability also covers liabilities that fail the recognition criteria, unlike provisions, which are recognised.

  1. AWithin the Standard, 'contingent' 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
  2. BProvisions are contingent because their timing or amount is certain
  3. CThe term 'contingent liability' is used only for liabilities that meet the recognition criteria
  4. DA contingent asset is one whose existence is confirmed by events wholly within the entity's control

Explanation

Para 12 says all provisions are contingent in a general sense due to uncertainty in timing or amount, but within the Standard 'contingent' refers to items not recognised whose existence depends on uncertain future events not wholly within the entity's control. Contingent liability also covers liabilities not meeting recognition criteria.

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