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

Under Ind AS 37, a present obligation for which it is not probable that an outflow of resources embodying economic benefits will be required to settle it is:

It is a contingent liability and is not recognised as a liability. Ind AS 37 classifies present obligations failing the recognition criteria, such as where an outflow of economic benefits is not probable, as contingent liabilities rather than provisions.

  1. ARecognised as a provision at the best estimate
  2. BRecognised as a contingent asset
  3. CA contingent liability, not recognised as a liabilityCorrect
  4. DIgnored completely as it is not a liability of any kind

Explanation

The Standard says present obligations that do not meet the recognition criteria, because outflow is not probable or no reliable estimate is possible, are contingent liabilities and are not recognised as liabilities. It is not a contingent asset, which relates to inflows.

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