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    Question

    Which of the following statement is incorrect with respect to provisions?

    A Provision is a liability of uncertain timing and amount Correct Answer Incorrect Answer
    B Provisions are contingent upon happening/non happening of an event Correct Answer Incorrect Answer
    C A provision is recognized when an entity has a present obligation that is a result of past event. Correct Answer Incorrect Answer
    D A provision is recognized when a reliable estimate can be made of the amount of obligation Correct Answer Incorrect Answer
    E All are correct Correct Answer Incorrect Answer

    Solution

    Ind AS 37 defines a provision as a liability of uncertain timing and amount and prescribes conditions that have to be satisfied for recognition of a provision. A provision shall be recognised when: ·         an entity has a present obligation (legal or constructive) that is a result of a past event; ·         it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and ·         a reliable estimate can be made of the amount of the obligation. A contingent liability is contingent upon happening/non happening of an event. An entity shall not recognise a contingent liability.

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