Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets Objective Applicability

Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets
Objective The objective of this Standard is to ensure that appropriate recognition criteria and measurement
bases are applied to provisions, contingent liabilities and contingent assets and that sufficient
information is disclosed in the notes to enable users to understand their nature, timing and amount.
Applicability This Standard shall be applied by all entities in accounting for provisions, contingent liabilities and
contingent assets, except:
a) those resulting from executory contracts, except where the contract is onerous; and
b) those covered by another Standard.
S.No Particulars Y/N/NA Remarks

.
PROVISIONS
1. List all provisions are recognized by the entity.
2. Whether the provision is recognized only when following criteria are

met:
a) entity has a present obligation (legal or constructive) as a
result of a past event;
b) it is probable 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.
3. Whether the amount of provision to be recognized is estimated

appropriately by measuring its ‘expected value’?
4. Whether any risk adjustment is made while estimating the amount of

provision to be recognized?
[However, uncertainty does not justify the creation of excessive

provisions or a deliberate overstatement of liabilities.]
5. Whether the provisions are discounted to the present value of the

expenditures expected to be required to settle the obligation?
Whether the discount rate used is pre-tax rate?
6. Whether the effect of any possible new legislation is taken into

consideration in measuring an existing obligation?
If yes, whether sufficient objective evidence existed that the

legislation is virtually certain to be enacted?
7. Whether provisions are reviewed at the end of each reporting period

and adjusted to reflect the current best estimate?
8. Whether the provisions are used only for expenditures for which the
provision was originally recognized?
9. Whether it is ensured that provisions are not recognized for future

operating losses?
CONTINGENT LIABILITIES
10. Whether any contingent liability is disclosed by the entity?
11. Whether it is ensured that no contingent liability is disclosed when

the possibility of outflow of resources embodying economic benefits
is remote?
12. Whether the entity is jointly and severally liable for an obligation?
If yes, whether the part of the obligation that is expected to be met by

other parties is treated as a contingent liability and a provision is
recognized for the remaining part?
13. Whether contingent liabilities are assessed continually to determine

whether an outflow of resources embodying economic benefits has
become probable?
If yes, whether a provision is recognized in the financial statements

of the period in which the change in probability occurs?
CONTINGENT ASSETS
14. If an inflow of economic benefits has become probable, whether the
entity discloses a contingent asset?
15. Whether contingent assets are assessed continually to ensure that

developments are appropriately reflected in the financial statements?
16. If it has become virtually certain that an inflow of economic benefits

will arise, whether the asset and the related income are recognized in
the financial statements of the period in which the change occurs?
REIMBURSEMENTS
17. Whether any reimbursement against the expenditure required to settle
a provision is expected to be received from another party (for
example, through insurance contracts, indemnity clauses or suppliers’
warranties)?
18. Whether such reimbursement is recognized only when it is certain

that reimbursement will be received if the entity settles the
obligation?
19. Whether such reimbursement is treated as a separate asset?
20. If the entity is not liable for the costs in question when the third party
fails to pay, in such a case, the entity has no liability for those costs
and thus, whether they are not included in the provision?
ONEROUS CONTRACTS
21. Whether the entity has a contract that is onerous?
If yes, whether the present obligation under such contract is

recognized and measured as a provision?
22. Whether such onerous contract is recognized at the unavoidable costs

under the contract?
[The unavoidable cost is the least net cost of exiting from the
contract, which is the lower of the cost of fulfilling it and any
compensation or penalties arising from failure to fulfill it.]
RESTRUCTURING
23. Whether any provision for restructuring costs is recognized by the
entity?
If yes, whether all general recognition criteria for provisions are met?
24. Whether the management or board decision to restructure taken

before the end of the reporting period, is not recognized at the end of
the reporting period, unless the entity has, before the end of the
reporting period:
a) started to implement the restructuring plan; or

b) announced the main features of the restructuring plan to
those affected by it?
25. If the entity starts to implement a restructuring plan, or announces its

main features to those affected, only after the reporting period, then
whether disclosure is made, as required under ‘Ind AS 10 Events
after the Reporting Period’?
26. Whether the restructuring provision include only the direct

expenditures arising from the restructuring and are not associated
with the ongoing activities of the entity?
DISCLOSURE REQUIREMENTS -
1. For each class of provision, the entity shall disclose:
a) the carrying amount at the beginning and end of the period;

b) additional provisions made in the period, including increases
to existing provisions;
c) amounts used (ie incurred and charged against the provision)
during the period;
d) unused amounts reversed during the period; and
e) the increase during the period in the discounted amount
arising from the passage of time and the effect of any change
in the discount rate.
2. The entity shall disclose for each class of contingent liability a brief
description of the nature of the contingent liability and:
a) an estimate of its financial effect;

b) an indication of the uncertainties relating to the amount or
timing of any outflow; and
c) the possibility of any reimbursement.
3. The entity shall disclose a brief description of the nature of the

contingent assets at the end of the reporting period, and, where
practicable, an estimate of their financial effect.
Relevant Definitions –
1) A provision is a liability of uncertain timing or amount.

2) An obligating event is an event that creates a legal or constructive obligation that results in an entity having no
realistic alternative to settling that obligation.
3) A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the entity; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to
settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
4) A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
5) An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
6) A restructuring is a programme that is planned and controlled by management, and materially changes either:
(a) the scope of a business undertaken by an entity; or
(b) the manner in which that business is conducted.

Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets Objective Applicability

Uploaded by

Copyright:

Available Formats

Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets Objective Applicability

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets Objective Applicability

Uploaded by

Copyright:

Available Formats

Ind AS - 21 Provisions, Contingent Liabilities and Contingent Assets

S.No Particulars Y/N/NA Remarks

2. Whether the provision is recognized only when following criteria are

3. Whether the amount of provision to be recognized is estimated

4. Whether any risk adjustment is made while estimating the amount of

[However, uncertainty does not justify the creation of excessive

5. Whether the provisions are discounted to the present value of the

Whether the discount rate used is pre-tax rate?

6. Whether the effect of any possible new legislation is taken into

If yes, whether sufficient objective evidence existed that the

7. Whether provisions are reviewed at the end of each reporting period

9. Whether it is ensured that provisions are not recognized for future

11. Whether it is ensured that no contingent liability is disclosed when

If yes, whether the part of the obligation that is expected to be met by

13. Whether contingent liabilities are assessed continually to determine

If yes, whether a provision is recognized in the financial statements

15. Whether contingent assets are assessed continually to ensure that

16. If it has become virtually certain that an inflow of economic benefits

18. Whether such reimbursement is recognized only when it is certain

19. Whether such reimbursement is treated as a separate asset?

If yes, whether the present obligation under such contract is

22. Whether such onerous contract is recognized at the unavoidable costs

24. Whether the management or board decision to restructure taken

a) started to implement the restructuring plan; or

25. If the entity starts to implement a restructuring plan, or announces its

26. Whether the restructuring provision include only the direct

a) the carrying amount at the beginning and end of the period;

a) an estimate of its financial effect;

3. The entity shall disclose a brief description of the nature of the

1) A provision is a liability of uncertain timing or amount.

You might also like