IAS-37 — OpenTuition Forums

JJames4y ago

Hello P2-D2, hope you are fine. I have two queries. Please help me. Query 1: My tutor told me that we have to record liability when there are virtually certain chances of obligation to arise. I studied from various sources all of them said that. However, ACCA official IAS-37 said that we need to recognize provision (not liability) when virtually certain chances, Reference: https://www.accaglobal.com/my/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/ias-37.html Query 2: Now, taking above question into consideration, if we are recording Possible Obligation as Provision (on Virtually Certain chances) so why are we recording Possible Asset as Asset (on Virtually certain chances)? We should be one-step back in Asset than in Liabilities as per prudence. So according to me, we should record Reimbursement of Provision (on Virtually certain chances) or something like that, Hope I am able to deliver queries well. I will wait for your reply

P2-D2Tutor4y ago#1

Hi, I'm well thanks. A mild dose of Covid but doing well. 1. Your tutor is correct in that if the uncertainty surrounding the scenario is now that it is virtually certain that it is going to happen then there is effectively no uncertainty and so we recognise a liability and not a provision. 2. Possible obligations are not recorded as a provision, they are disclosed as a contingent liability but then I'm not too sure on the rest of what you are asking in the question. Which question are you referring to? Thanks

JJames4y ago#2

Hello tutor, sorry to hear this. Hope you have a instant recovery. 1. Yes tutor. I studied on various place which said to record it as Liability when virtually certain. However the link I mentioned is ACCA approved articles which is having a table which reads that if chances of occurrence of obligation are virtually certain so record a provision not a liability. I have mentioned the link again. Please have look on that table. Link: https://www.accaglobal.com/my/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/ias-37.html

P2-D2Tutor4y ago#3

Hi, If the outflow if going to happen (i.e. it is virtually certain) then we have a liability. A provision is a liability of uncertain timing and amount, so it is going to happen then there is no uncertain timing or amount and so a liability is recorded. Thanks