AS 29 Quick Revision | Provisions Contingent Liabilities |

Accounting Standard 29 deals with Provisions Contingent Liabilities and Contingent Assets. Exam point of view, AS 29 will be asked mostly as a practical question. A situation will be given and students are asked whether that company has to create provision under AS 29 or not. Another Important Topic in AS 29 is, Disclosures. Students are recommended to read the AS 29 practical problems from Practice Manual.

Provision under AS 29

Provision should be recognised (amount debited to P&L a/c) only when these all 3 Conditions must satisfy):

  • An enterprise has a present obligation as a result of a past event
  • It is probable that there will be an outflow of resources
  • A reliable estimate can be made of the amount of obligation

For Example: Maggi has been selling Noodles for the past 20 years. Maggi didn’t disclose on their packing that there is a harmful substance for children. Due to this, around 100 people has filed a case on maggi, claiming that they got lung diseases due to Maggi.

AS 29 Accounting Standard Example

Now, see the above three conditions. One, This is a Present Obligation due to a Past event. Two, It is highly probable that these people will win the case. Three, We can also estimate what is going to be Compensation (If you can’t estimate the compensation, treat it as Contingent Liability, see below).

So, Maggi will now create a provision, say for roughly Rs.30 Crore.

Contingent Liability under AS 29

It is a present obligation that arises from past events, but is not recognised because:

  • It is not probable that an outflow of resources to settle the obligation.
  • A reliable estimate of the amount of the obligation cannot be made.

An enterprise should not recognise a contingent liability but it has to be disclosed by way of Footnote.

Contingent Asset under AS 29

A contingent asset is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise.

Note: An enterprise should not recognise a contingent asset.

Disclosure under AS 29 (V.Imp)

For each class of Provision, an enterprise should disclose:

  • The carrying amount at the beginning and end of the period
  • Additional provisions made in the period , including increases to existing provisions.
  • Amounts used ( i.e., incurred and charged against the provision) during the period ; and
  • Unused amounts reversed during the period
  • A brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits.
Updated: May 5, 2018 — 5:44 pm

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  1. Thank you . This summary is really helpful .
    Can you please manage to send the summary notes of all other group 2 AS’s ??
    Please it will be a huge help …

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