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- 3 Marks
Question
The objective of IAS 37: Provisions, Contingent Liabilities, and Contingent Assets is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities, and contingent assets, and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing, and amount.
Required:
Explain Contingent Liability and Contingent Asset as used in the statement above.
(Total: 3 marks)
Answer
Contingent Liability:
- A possible obligation depending on whether some uncertain future event occurs, or
- A present obligation, but payment is not probable, or the amount cannot be measured reliably.
(1.5 marks)
Contingent Asset:
- A 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.
(1.5 marks)
- Tags: Contingent Asset, Contingent Liability, Disclosure, Financial Reporting, IAS 37
- Level: Level 2
- Topic: contingent liabilities and contingent assets
- Series: JULY 2023
- Uploader: Uploader1