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Is it true that contingent asset or liability do not have journal entries because they are disclosed in the notes with their descriptions according to IAS 37?
If that is true then it confused me by the fact that the contingent liability in consolidation has in fact double entry as mentioned in the notes where net assets is debited and contingent liability is credited to record them in our financial statements?
Hi,
Yes, that is correct regarding journal entries and contingent assets/liabilities in individual company accounts. Neither are recognised in the financial statements but each are disclosed in the notes to the accounts, following the treatment under IAS 37.
We do recognise a contingent liability at fair value in the group accounts under IFRS 3. The contingent liability still remains unrecognsised and disclosed in the individual accounts of the subsidiary however the treatment is different in the group accounts. In the group accounts it is shown on the group SFP and adjusted for in the net assets of the subsidiary working.
Thanks
I always ask myself.
Should that mean that contingent assets are also recognised?
This is because recognition of contingent liability means that we debit investment cost on the other side of double entry, which we may never pay.
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