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

Which statement best describes how Ind AS 37 treats a provision in contrast with a contingent liability?

A provision is recognised as a liability because it is a present obligation with a probable outflow and a reliable estimate, while a contingent liability is not recognised as a liability because it is a possible obligation or a present obligation failing the recognition criteria.

  1. AA provision is a present obligation recognised as a liability; a contingent liability is not recognised as a liabilityCorrect
  2. BA provision is not recognised but a contingent liability is recognised
  3. CBoth are recognised as liabilities but at different amounts
  4. DBoth are only disclosed and never recognised

Explanation

Provisions are recognised as liabilities, assuming a reliable estimate, because they are present obligations with a probable outflow. Contingent liabilities are not recognised as liabilities. Hence option A is correct and the others reverse or blur this.

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