International Financial Reporting Standards (in short IFRS) are describing contingent assets as \u201cpossible assets that arise 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\u201d.\u00a0<\/p>\n
An example of a contingent asset would be a claim entity has against another entity where the outcome of the legal case and the process is uncertain. Whilst the outcome is uncertain, the management has still assessed it to be probable the entity will incur inflow of economic benefits and as such, they are required to disclose such an asset within the Annual Report. If it\u2019s less likely the entity will gain any income, it\u2019s not disclosed even as a contingent asset. An assessment of \u201cless likely\u201d or \u201cmore likely\u201d needs to be done on the realization of the asset for the decision here.<\/p>\n
However, in the light of realization of the income being certain (and not likely), the asset is recognized on the statements. As a result it also becomes an asset and stops being a contingent asset.<\/p>\n
When we start defining \u201ccertain\u201d we need to look into what the \u201casset\u201d entails. An asset and what we\u2019re assessing, is the income effectively and as such, we would only recognize income if it\u2019s certain we will actually get it, i.e. there\u2019s an actual inflow of benefits for the entity. To be more conservative as opposed to recognizing provisions for liabilities (wherein if it\u2019s more likely expenses are to be incurred, the provision is accrued) assets and relating revenues are only recognized if it\u2019s 100% certain they will be realized. I would even go as far as saying that if you\u2019re in slight doubt you will get the inflow, treat it as a contingent asset and disclose it within the Annual Report.<\/p>\n","protected":false},"excerpt":{"rendered":"
International Financial Reporting Standards (in short IFRS) are describing contingent assets as \u201cpossible assets that arise 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\u201d.\u00a0<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[],"class_list":["post-4952","post","type-post","status-publish","format-standard","hentry","category-4-1-annual-report"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4952","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=4952"}],"version-history":[{"count":1,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4952\/revisions"}],"predecessor-version":[{"id":4953,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4952\/revisions\/4953"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=4952"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=4952"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=4952"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}