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IAS 37 Provisions, Contingent Liabilities and Contingent Assets – ACCA (FA) lectures

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    • John, I’m interested in how we classify and treat guarantees and warranties. The probability of product failure giving rise to a claim could be less than 2%, but the volume of sales might make at least one claim per year, virtually certain.

      Let’s say we allow a provision, based upon the expected claims in the year, does this liability ‘behave’ in the same way as, E.g. a provision for bad and doubtful debts? Thank you.

  2. Dear sir, First of all thank you for helping students like us.

    My understanding of contingent liability is that if obligation is probable then we should recognize it the financial statement.
    If obligation is possible then disclose it in the financial statements by way of a note.
    and if obligation is remote, do nothing.

    Is my understanding is correct, if not please specify the correct treatment.

    Thanking you in anticipation.

  3. Hi sir and thank you for all lessons!!!

    if the accident happens after the year end why do we even consider showing it in THIS YEAR statements?
    why not simply leave it for next years statement

  4. Sir, shouldn鈥檛 probable – possible – and remote tests be done only for contingent liabilities/assets; as the provision is certainly a liability and will have to be paid ?

    I am somewhat confused because I find these tests mentioned for Provision – whose payment is not contingent (dependent). Only the time and amount is uncertain. But it will be paid and recorded.

    • I was thinking this too.
      I went to the BPP text and there is a note under the contingency learning section that says ” If an obligation is probable, it is not a contingent liability, instead a provision is needed and if it is remote, it requires no disclosure. ”

      So my understanding is that Probable falls under Provisions, but Possible and Remote falls under Contingent Liability.

      Hope this helps.

  6. About the contingent liability, we have to write a note if the accident takes place after the current year. I want to know how long after the end of the year we’ll have to write a note in the current year’s financial statement?

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