IAS 37 - Provisions, Contingent Liabilities, Contingent Assets

Question 1

Provisions, Contingent Liabilities, Contingent Assets (IFRS)

Answer 1

Provisions- a liability of uncertain timing or amount. May be recognized when:
* The entity has a present legal or constructive obligation as a result of a past event,
* It is probable that an outflow of economic benefits will be required to settle the obligation; and
* A reliable estimate can be made of the amount of the obligation
Contingent liabilities  NOT recognized:
* A possible obligation that arises from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly in the control of the entity;
* A present obligation that arises from past events is not recognised when an outflow of future economic benefits is not probable or the amount of the obligation cannot be measured reliably.
Contingent assets NOT recognized:
* – possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Reference: IAS 37