IAS 37Chapter 4Lesson 1
Contingent liabilities and contingent assets
Step 1 of 7Learning objectives
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Neither contingent liabilities nor contingent assets are recognised. A contingent liability is disclosed in the notes unless the outflow is remote; a contingent asset is disclosed only if the inflow is probable, and it is recognised only when the inflow becomes virtually certain: it is then no longer contingent. For a joint and several obligation, the part expected to be met by the other parties is a contingent liability. Both are assessed continually.
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Learning objectives
- Identify a contingent liability and its treatment: not recognised, disclosed unless the outflow is remote, reassessed at each reporting date.
- Calculate the part of a joint and several obligation that is provided for and the part treated as a contingent liability.
- Identify a contingent asset and its treatments: never recognised, disclosed if the inflow is probable, recognised as an asset when the inflow becomes virtually certain.
- Distinguish the asymmetric thresholds for liabilities (probable) and assets (virtually certain), and record the asset that has become virtually certain.