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

Which statement about the use of the term 'contingent' in Ind AS 37 is correct?

Within Ind AS 37, 'contingent' describes liabilities and assets that are not recognised because their 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.

  1. AIt is used for liabilities and assets not recognised because their existence will be confirmed only by uncertain future events not wholly within the entity's controlCorrect
  2. BIt is used for every provision because all provisions are uncertain
  3. CIt is used only for assets and never for liabilities
  4. DIt is used for liabilities that are certain in amount but uncertain in timing

Explanation

Paragraph 12 says that although all provisions are contingent in a general sense, within the Standard 'contingent' is used for items not recognised because their existence depends on uncertain events outside the entity's wholly controlled actions. It also covers liabilities not meeting recognition criteria.

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