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

Under Ind AS 37, which statement best explains why, in a general sense, all provisions are described as contingent, yet the Standard restricts the term 'contingent' to certain items?

Provisions are uncertain in timing or amount, yet Ind AS 37 limits the term contingent to liabilities and assets that are unrecognised because their existence depends on uncertain future events not wholly within the entity's control, and to liabilities that fail the recognition criteria.

  1. AAll provisions are uncertain in timing or amount, but the Standard uses 'contingent' only for liabilities and assets not recognised because existence depends on uncertain future events not wholly within the entity's control, and for liabilities failing recognition criteriaCorrect
  2. BThe Standard uses 'contingent' for every provision because all provisions are uncertain
  3. CThe Standard uses 'contingent' only for assets and never for liabilities
  4. DThe Standard uses 'contingent' only for obligations that are certain in amount but uncertain in timing

Explanation

The Standard notes that provisions are uncertain in timing or amount, but it reserves 'contingent' for items not recognised because existence is confirmed only by uncertain future events outside the entity's control. It also uses 'contingent liability' for liabilities that fail the recognition criteria. The other options misstate this scope.

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