ACCA Applied Knowledge · Financial Accounting · Provisions and contingencies
Which statement about contingent liabilities under IAS 37 is correct?
Contingent liabilities need not be disclosed when the possibility of an outflow of economic benefits is remote. They are not recognised in the statement of financial position, and are otherwise disclosed in the notes.
- AThey are recognised in the statement of financial position when the outflow is possible
- BThey are not disclosed if the possibility of an outflow is remoteCorrect
- CThey are always measured at the best estimate and charged to profit or loss
- DThey arise only from constructive obligations
Explanation
Contingent liabilities are disclosed unless the possibility of an outflow is remote, in which case no disclosure is made. They are not recognised in the statement of financial position, and they can arise from possible obligations whose existence depends on future events, not only constructive ones.
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