LKAS 37 Provisions,Contingent Liabilities and Contingent assets

LKAS 37 Provisions,Contingent Liabilities and Contingent assets

1. Appropriate measurement and recognition criteria

   • Provisions,Contingent liabilities and Contingent Assets
   • The sufficient information is disclosed in the notes to enable the    nature                                                   Timing                                                Amount
   • This standard is not apply,                          Financial instruments               Executory Contracts               Insuarance policies

2. Provision - a liability of uncertain timing or amount

   • Liability is a present obligation of the enterprise arising from the past events, the settlement of which is expected to result in an outflow from the enterpise of resources embodying economic benefits
   • Provisions can be distinguished from other liabilities , Uncertainity about the timing or amount of the future expenditure required in settlement  
   • Recognition
     • Present obligation
       • An enterpise has a present obligation (legal /constructive) as a result of past event
       • taking all the available evidence in to account , it is more likely than not that a present obligation exists at the balance sheet date
       • Legal obligation
         • A contract Legislation Other operation of law
         • warranties
         • Single guarantee
       • Constructive obligation
         • That derives from enterprises actions where, established pattern of past practice,published policies, sufficient specific current statement, the enterprise indicated to other parties that it will accept certain responsibilities
         • as a result the enterprise has created a valid expectations on the other parties
         • Refunds policy
     • Probable settlement
       • It's probable an outflow of resources embodying economic benefits will be required to settle the obligation 
     • Reliable estimate
       • how much can be made of the amount of the obligation

3. Application of the recognition and measurement rules

   • Future operating losses
     • Not a provision
   • Onerous contract
     • A provision

4. Changes in provision

   • Current best estimate

5. Use of provisions

   • Originally recognized expenditure

6. Reimbursement of the provision

   • Separate asset
     • Income statement
       • net amount

7. Restructuring

   • Scope
   • Manner
   • Direct expenditure arising from the restructuring
     • Necessarily entailed by the restrucuring
     • Not associated with ongoing activities

8. Contingent liability

   • Possible obligation
     • Existance will be confirmed
       • Occurance or non occurence one or more future events
   • Disclose

9. Contingent asset

   • Possible asset
   • Disclose