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

Which of the following best captures why Ind AS 37 says that in a general sense all provisions are contingent, yet uses the term 'contingent' only for certain items?

Provisions are uncertain in timing or amount, but Ind AS 37 reserves 'contingent' for liabilities and assets whose existence is confirmed only by uncertain future events outside the entity's wholly controlled actions, and for liabilities that fail the recognition criteria.

  1. AProvisions are uncertain in timing or amount, but 'contingent' is reserved for liabilities and assets whose existence will be confirmed only by uncertain future events not wholly within the entity's control, and for liabilities not meeting recognition criteriaCorrect
  2. BAll provisions are contingent liabilities and must be disclosed only in notes
  3. CContingent items are those where the amount is certain but timing is uncertain
  4. DThe term contingent applies only to assets and never to liabilities

Explanation

The standard notes provisions are uncertain in timing or amount, but restricts 'contingent' to items whose existence depends on uncertain future events not wholly within the entity's control, and also to liabilities failing recognition criteria. Option B wrongly merges provisions with contingent liabilities. Option C reverses the logic. Option D is wrong as contingent liabilities exist.

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