- “IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for
provisions (liabilities of uncertain timing or amount), together with contingent assets (possible
assets) and contingent liabilities (possible obligations and present obligations that are not
probable or not reliably measurable). Provisions are measured at the best estimate (including
risks and uncertainties) of the expenditure required to settle the present obligation, and reflects
the present value of expenditures required to settle the obligation where the time value of
money is material.
IAS 37 was issued in September 1998 and is operative for periods beginning on or after 1 July
1999”.
Required:
Write a report covering following:
a) Introduction, objective and recognition criteria of IAS 37 Provisions, Contingent assets
and contingent liabilities.
b) Study the financial statements of different companies and select five companies which
have either created provision or had to deal with contingent asset/liability.
c) Discuss the nature of such provisions/contingencies and reasoning behind their creation.
Analyse the impact of provisions on the financial performance and position of these
companies.
d) What are the major issues in current standard on provisions? How is IASB trying to
address these issues?
2500 WORDS
