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CA Final Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets — practice questions

Explore 42 free Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets questions in CA Final Financialreporting. Open each question or exercise to read its content, reference answers and available explanation.

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Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets questions and exercises with answers

Showing questions 1–30 of 42.

Under IAS 37, a provision is best described as a liability of what kind?Read the answer and worked solution →A provision needs a present liability arising from what?Read the answer and worked solution →Which condition must be met before an entity recognizes a provision?Read the answer and worked solution →Recognition of a provision also requires that the obligation amount can be what?Read the answer and worked solution →How many conditions must all be fulfilled for an IAS 37 provision to be recognized?Read the answer and worked solution →Provisions are generally measured at which amount?Read the answer and worked solution →When the settlement of an obligation lies far in the future, the provision is measured using what?Read the answer and worked solution →Which statement about contingent liabilities under IAS 37 is correct?Read the answer and worked solution →A contingent asset is disclosed where an inflow of economic benefits is what?Read the answer and worked solution →Contingent items arise from past events, but their existence is confirmed only by what?Read the answer and worked solution →In 1998, IAS 37 was first issued by which body?Read the answer and worked solution →IAS 37 superseded which earlier standard on contingencies?Read the answer and worked solution →Which abuse of provisions did IAS 37 help to minimise?Read the answer and worked solution →The key principle of IAS 37 is that a provision is recognized only when the entity has what?Read the answer and worked solution →A liability is a present obligation whose settlement is expected to cause an outflow of what?Read the answer and worked solution →Which of these is a common example of a provision?Read the answer and worked solution →Cleaning up pollution after a mine closes is which provision?Read the answer and worked solution →Is a provision a form of savings set aside by the entity?Read the answer and worked solution →In the books, a reserve is always an account with what kind of balance?Read the answer and worked solution →Recording a provision as a liability is matched on the income statement by what?Read the answer and worked solution →A contract under which neither party has performed any obligation is known as what?Read the answer and worked solution →A contract where unavoidable costs exceed the expected benefits is called what?Read the answer and worked solution →An executory contract becomes subject to a provision when it turns what?Read the answer and worked solution →A restructuring is a programme planned and controlled by whom?Read the answer and worked solution →Which cost is excluded from a restructuring provision?Read the answer and worked solution →Why are marketing and investment in new systems excluded from a restructuring provision?Read the answer and worked solution →Is a provision recognized for costs needed to operate the business in the future?Read the answer and worked solution →To whom must an obligation be owed for a provision to arise?Read the answer and worked solution →In a classification of contingent liabilities, which is an explicit contingent liability?Read the answer and worked solution →Which item is a typical example of a contingent liability?Read the answer and worked solution →

Worked practice questions

Under IAS 37, a provision is best described as a liability of what kind?

  1. Unknown party only
  2. Fixed timing and amount
  3. Certain amount only
  4. Uncertain timing or amount
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Correct answer: D. Uncertain timing or amount

A provision differs from an ordinary payable because either when it will be settled or how much it will be is not certain.

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A provision needs a present liability arising from what?

  1. A management intention
  2. An event in the past
  3. A budget forecast
  4. A future contract
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Correct answer: B. An event in the past

Recognition needs an obligation that already exists, which means it must have arisen from something that has already happened.

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Which condition must be met before an entity recognizes a provision?

  1. Profit exceeds a threshold
  2. Auditor approves the amount
  3. Cash is set aside in a fund
  4. Outflow of resources is likely
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Correct answer: D. Outflow of resources is likely

One of the three recognition tests is that an outflow of resources is likely to be needed to settle the liability.

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More Financialreporting topics

Ind AS 116 LeasesInd AS 36 Impairment of Assets and Ind AS 38 Intangible AssetsInd AS 24 Related Party Disclosures and Ind AS 108 Operating SegmentsInd AS 1 Presentation of Financial StatementsInd AS 12 Income TaxesInd AS 113 Fair Value MeasurementInd AS 109 Financial InstrumentsInd AS 23 Borrowing Costs and Ind AS 40 Investment Property