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

Which statement about the use of the word '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 the occurrence or non-occurrence of uncertain future events not wholly within the entity's control. Contingent liability also covers liabilities failing the recognition criteria. Provisions are recognised items.

  1. AIt is used for all provisions, since all provisions are uncertain in timing or amount
  2. BIt 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
  3. CIt is used only for liabilities and never for assets
  4. DIt is used for any obligation that is expected to be settled after twelve months

Explanation

Ind AS 37 says that all provisions are contingent in a general sense, but within the Standard 'contingent' is used for liabilities and assets whose existence is confirmed only by uncertain future events not wholly within the entity's control. The term 'contingent liability' also covers liabilities that do not meet the recognition criteria. Option A fails because provisions are recognised, not contingent, in the Standard's sense.

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