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

Which one of the following statements about the term 'contingent' in Ind AS 37 is correct?

The standard uses 'contingent' for liabilities and assets whose existence depends on uncertain future events not wholly within the entity's control, and also for liabilities that fail the recognition criteria. Provisions are recognised, while contingent liabilities are not.

  1. AProvisions are never uncertain in timing or amount
  2. BThe term 'contingent' applies to liabilities and assets whose existence will be confirmed only by uncertain future events not wholly within the entity's control, and also to liabilities that do not meet recognition criteriaCorrect
  3. CContingent liabilities are recognised in the balance sheet while provisions are only disclosed
  4. DThe term 'contingent' applies only to assets

Explanation

Ind AS 37 says all provisions are uncertain in timing or amount, but the term 'contingent' is reserved for liabilities and assets whose existence is confirmed only by uncertain future events not wholly within the entity's control. It is also used for liabilities failing recognition criteria. Option A contradicts the standard. Option C reverses the treatment of provisions and contingent liabilities.

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