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Provisions, contingent liabilities and contingent assets

Objective of IAS 37

1.1 The need for IAS 37

At any year end, situations may exist that could cause future liabilities to be paid or
assets to be received.

There is UNCERTAINTY regarding the amounts that will be paid or received.

For example:

Uncertain liabilities:

 damages from an unresolved court case against an entity

 customers’ warranty claims.

Uncertain assets:

 claims against an insurance policy

 compensation from court cases when the entity is the
claimant.

IAS 37 outlines the rules for accounting for these uncertain assets or liabilities.

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