Under IAS 37, a contingent asset is generally recognized in the financial statements when the related economic benefits become:
Correct answer: C. Virtually certain
- A. Possible
- B. Probable
- C. Virtually certain
- D. Legally demanded
Explanation
A contingent asset is not recognized while an inflow is merely possible or probable. Recognition becomes appropriate when the inflow is virtually certain, at which point it is no longer treated as contingent.
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About Accruals, Prepayments and Provisions
Accruals and prepayments adjust income and expenses to the accounting period in which they are earned or incurred, following the matching principle. Provisions recognise expected obligations or losses when their amount or timing is uncertain, which distinguishes them from ordinary accruals and from general reserves.
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More Accruals, Prepayments and Provisions questions
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If an obligation is possible but the related outflow of economic benefits is remote, IAS 37 generally requires the entity to: