IFRS 37 Contingent liability and defining examples
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Explain how IFRS defines a contingent liability and provide an example.
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Solution Summary
Your discussion is 445 words and includes the exact wording from IFRS 37. Two examples are given, one that is accrued and one that is disclosed only.
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IFRS 37 defines a contingent liability as (exact quote):
"... liabilities of uncertain timing or amount. A provision should be recognised when, and only when:
(a) an entity has a present obligation (legal or constructive) as a result of a
past event;
(b) it is probable (ie more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation;
and
(c) a reliable estimate can be made of the amount of the obligation.
The Standard notes that it is only in extremely rare cases that a reliable
estimate will not be possible. (IFRS 37, para IN2)
"In rare cases, for example in ...
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