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Hi sir following is the question regarding AS 37
Due to the volatility of a new chemical, there is a 90% risk of a fire causing $1 million worth of damage
and a 10% risk of a fire causing $10 million worth of damage. Although there was no fire during the year
the finance team thinks the expense should be recognised given that there is a certainty that there will
be one.Answer
we will not make any provision as no obligating event(fire)happen during the year.
Do we need to disclose any contingent liability for an amount of 1 million?If there’s been no fire, there’s no provision and no contingent liability.
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