Contingencies

Question 1

Contignent liability

Answer 1

liability that doesn’t meet the recognition criteria
A contingent liability is defined as a potential liability resulting from past event for which a future event will determine outflow of economic benefit required

Question 2

Contingent provision

Answer 2

liability that does meet the recognition criteria

Question 3

Contingent liability = Contingent provision when…

Answer 3

1) the entity has present obligation from a past event
2) probable outflow of economic resources (remote = low probability, Possible = not defined and use professional judgement, Probable = greater than 50% likelihood)
3) reliable estimate of outflow of economic resources (measure of estimate if many ranges = most likely outcome, weighted average or mid point range)

Question 4

If provision criteria not met

Answer 4

1) do not record, but disclose (if probable but not measurable, and if not probable but possible)
2) do not record or disclose (if not probable and not possible)

Question 5

Disclosure of contingencies

Answer 5

• brief description of nature/timing/uncertainty of payments
• any expected reimbursement amounts
• carrying amount at the beginning and end of period
• increases/decreases/reversals of unused amounts and increases due to passage of time

Question 6

Contingent asset

Answer 6

a potential asset resulting from past event for which a future independent event will determine an inflow of economic benefits
- Contingent assets are only recognized if virtually certain (and only if 100% under ASPE)
- in other words, he criteria to record contingent asset is stricter than recording a contingent liability

Question 7

Contingent Asset - Recording/Disclosing

Answer 7

1) record when virtually certain and measurable
2) disclose when virtually certain but not measurable, or when not virtually certain but probable
3) do not record or disclose when not virtually certain and not probable