Summary IAS 37 and IAS 10 Provisions, contingencies and events after the reporting date
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Course
Chartered accountancy (ACCC272)
Institution
North-West University (NWU)
Book
Gripping GAAP
A summary of the types of liabilities, recognition criteria, measurement and disclosure of contingent assets and liabilities according to IAS 37 and how to treat events after reporting date according to IAS 10
IAS 12 Taxation: Various types, current income tax and deferred tax
IAS 8 Accounting policies, estimates and errors
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North-West University (NWU)
Chartered accountancy (ACCC272)
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Study unit 9
IAS 37 – Provisions, contingent liabilities and contingent assets
Liabilities
Pure liability – Contingent liability – Provision –
A present obligation of the entity arising 2 types: A liability of uncertain
from past events, the settlement of - Does not meet the definition of a timing and/or amount
which is expected to result in an outflow liability
from the entity of resources embodying - Does not meet the recognition
economic benefits. criteria of a liability
• A present obligation • A possible obligation
• From past events • From past events
• It is not probable that settlement will • Existence will only be confirmed by
lead to outflow of economic benefits uncertain events
and/or • Not within control of the entity
• Amount cannot be measured reliably
Present obligation Past even creating a Legal obligation – enforceable by law
present obligation Constructive obligation – creates valid expectation
Obligating event Past even that Legal – exists independently from future actions
creates an obligation (walk-away test); always involved a 3rd party
that the entity has no Constructive – derives from actions of entity whereby
realistic alternative an established pattern (past practices, policy,
to settling statements) indicated to other parties & entity creates
valid expectation
Recognition criteria of IAS 37:
Probability and reliable estimate:
Probable inflow of economic benefit:
Provision: more likely to occur
than not to occur
Contingent: more likely that it
will not occur
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