Scribd
Upload
38 views2 pages

Understanding Accounting Contingencies

The document lists examples of recognized and disclosed loss/liability and gain/asset contingencies including litigation, taxes, warranties, construction contracts, and restoration costs. It also summarizes the accounting treatment for contingencies depending on the likelihood of the future event, requiring provisions, disclosures, or no mention based on the probability and ability to reliably estimate the contingency.

Uploaded by

Hwai Teng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
38 views2 pages

Understanding Accounting Contingencies

The document lists examples of recognized and disclosed loss/liability and gain/asset contingencies including litigation, taxes, warranties, construction contracts, and restoration costs. It also summarizes the accounting treatment for contingencies depending on the likelihood of the future event, requiring provisions, disclosures, or no mention based on the probability and ability to reliably estimate the contingency.

Uploaded by

Hwai Teng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

Examples of contingencies:

Recognised
Loss/Liability Contingencies:
1. Guarantees, obligations arising from bills
discounted and similar obligations
2. Litigations, claims and legal suits
3. Loss contingencies relating to taxes, such as
disputes in tax demands
4. Warranty costs, claims, penalties relating to sale
of goods and services
5. Loss contingency on construction contracts
6. Restoration cost of tin-mining and other
extractive operations at the end of useful or
lease life

Disclosed

[A provision
may be made
annually]

Gain/Asset Contingencies:
1. Tax losses and unabsorbed capital allowances
2. Contingent refund and profit guarantees in a
business acquisition

[Amount
reduced by
provision made]

Summary of the accounting treatments for contingencies


Likelihood of future
event (s)
crystallysing

Probable and
reliably estimated

Probable but
not reliably
estimated or
possible

Contingent losses/liabilities

Provide for in the


accounts

Disclose in the
notes to the
accounts

No mention

Contingent assets/gains

Disclose in the
notes to the
accounts

No mention

No mention

Exceptions: Guarantees and bills


Discounted

Accrued for in the Disclose in the


accounts
notes to the
accounts

Type of Contingency

Remote

Disclose in the
notes to the
accounts

You might also like