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CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

Which of the following is a contingent asset that an auditor should expect to be only disclosed, and not recognised, under Ind AS 37?

The damages claim against the supplier, with a probable but not virtually certain outcome, is a contingent asset to be disclosed only. Ind AS 37 permits recognition of such an asset only when realisation is virtually certain, as with accepted claims or existing receivables.

  1. AA claim for insurance compensation on destroyed goods, which the insurer has accepted in writing and agreed to pay
  2. BA claim for damages filed by the company against a supplier, where the outcome is probable but not virtually certainCorrect
  3. CA trade receivable from a customer that is past due but collectible
  4. DA refund of tax already assessed and credited by the department

Explanation

A contingent asset is a possible asset whose existence depends on uncertain future events. It is disclosed when an inflow is probable, and recognised only when realisation is virtually certain. The accepted insurance claim, receivable and credited refund are already assets.

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