IAS 37 - Provisions, Contingent Liabilities and Contingent Assets Flashcards
When should a provision be recognised?
> An entity has a present obligation as a result of a past event
It is probable that an outflow of economic resources will be required to settle the obligation
A reliable estimate can be made of the amount of the obligation (legal or contructive)
What is the definition of a provision?
A provision is a liability of uncertain timing or amount
What is the definition of a legal obligation?
A legal obligation is an obligation which derives from a contract, legislation or other operation of law
What is the definition of a constructive obligation?
A constructive obligation is an obligation that derives from an entity’s actions where :
> By an established pattern of past practise and published policies the entity has indicated to other parties that it will accept certain responsibilities
> As a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
What is the definition of a contingent liability?
A contingent liability is :
> A possible obligation that arises from past events and whose existence will be confirmed only be the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity
OR
> A present obligation that arises from past events but is not recognised because
-it is not probable that an outflow of resources embodying economic benefits will required to settle the obligation
- The amount of the obligation cannot be measured with sufficient reliability.
AN ENTITY SHOULD NOT RECOGNISE A CONTINGENT LIABILITY
What is the definition of a contingent asset?
A contingent asset is:
>A probable asset that arises from past events and whose existence will be confirmed only by the occurence or non-occurence of one or more uncertain future events not wholly within the control of the entity.
AN ENTITY SHOULD NOT RECOGNISE A CONTINGENT ASSET
