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

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

In Ind AS 37, 'contingent' applies to liabilities and assets whose existence will be confirmed only by uncertain future events not wholly within the entity's control. It also applies to liabilities that fail the recognition criteria. Estimated provisions are not contingent liabilities merely because their timing or amount is uncertain.

  1. AIt is used for liabilities and assets whose existence will be confirmed only by uncertain future events not wholly within the entity's control, and also for liabilities failing the recognition criteriaCorrect
  2. BIt is used only for assets and never for liabilities
  3. CIt describes any provision whose amount is estimated
  4. DIt is used for obligations that the entity has fully discharged but not yet recorded

Explanation

Paragraph 12 states that in a general sense all provisions are contingent because of uncertainty, but within the Standard 'contingent' is reserved for items whose existence is confirmed only by uncertain events not wholly within the entity's control, and also for liabilities that do not meet the recognition criteria. Estimated provisions are not therefore contingent items, and the other options contradict the text.

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