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TMI BlogContingencies and Events Occurring After the Balance Sheet Date [Before 30-3-2016]X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment in financial statements of (a) contingencies, and (b) events occurring after the balance sheet date. 2. The following subjects, which may result in contingencies, are excluded from the scope of this Standard in view of special considerations applicable to them: (a) liabilities of life assurance and general insurance enterprises arising from policies issued; (b) obligations under retirement benefit plans; and (c) commitments arising from long-term lease contracts. Definitions 3. The following terms are used in this Standard with the meanings specified : 3.1 A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence, or non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for services received are not contingencies as defined in paragraph 3.1, even though the amounts may have been estimated, as there is nothing uncertain about the fact that these obligations have been incurred. 4.3 The uncertainty relating to future events can be expressed by a range of outcomes. This range may be presented as quantified probabilities, but in most circumstances, this suggests a level of precision that is not supported by the available information. The possible outcomes can, therefore, usually be generally described except where reasonable quantification is practicable. 4.4 The estimates of the outcome and of the financial effect of contingencies are determined by the judgment of the management of the enterprise. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted bills of exchange and similar obligations undertaken by an enterprise are generally disclosed in financial statements by way of note, even though the possibility that a loss to the enterprise will occur, is remote. 5.6 Provisions for contingencies are not made in respect of general or unspecified business risks since they do not relate to conditions or situations existing at the balance sheet date. 6. Accounting Treatment of Contingent Gains Contingent gains are not recognised in financial statements since their recognition may result in the recognition of revenue which may never be realised. However, when the realisation of a gain is virtually certain, then such gain is not a contingency and accounting for the gain is appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions. An example of such contingencies may be the estimated uncollectable portion of accounts receivable. Another example of such contingencies may be the warranties for products sold. These costs are usually incurred frequently and experience provides a mean by which the amount of the liability or loss can be estimated with reasonable precision although the particular transactions that may result in a liability or a loss are not identified. Provision for these costs results in their recognition in the same accounting period in which the related transactions took place. 8. Events Occurring after the Balance Sheet Date 8.1 Events which occur between the balance sheet date and the date on which the financial statements are appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... events which, although they take place after the balance sheet date, are sometimes reflected in the financial statements because of statutory requirements or because of their special nature. Such items include the amount of dividend proposed or declared by the enterprise after the balance sheet date in respect of the period covered by the financial statements. 8.6 Events occurring after the balance sheet date may indicate that the enterprise ceases to be a going concern. A deterioration in operating results and financial position, or unusual changes affecting the existence or substratum of the enterprise after the balance sheet date (e.g., destruction of a major production plant by a fire after the balance sheet date) may indicate a need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 10 is not met, unless the possibility of a loss is remote. 12. Contingent gains should not be recognised in the financial statements. Events Occurring after the Balance Sheet Date 13. Assets and liabilities should be adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date or that indicate that the fundamental accounting assumption of going concern (i.e., the continuance of existence or substratum of the enterprise) is not appropriate. 14. Dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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