10 Questions
Which of the following best describes a liability?
A present obligation arising from past events, expected to result in an outflow of resources
What is an obligating event?
An event that creates legal or constructive obligations with no realistic alternative for settlement
What best describes a contingent liability?
A possible obligation that may arise from past events, confirmed by future events not in control of the entity
What characterizes a contingent asset?
A possible asset confirmed by uncertain future events not within the control of the entity
Which statement best defines a legal contract in the context of obligations?
A formal agreement that creates a legal obligation for settlement
An obligating event can only be created by a legal contract
False
A contingent asset may arise from past events that are not within the control of the entity
True
A contingent liability is a present obligation arising from past events
False
Contingent assets are confirmed by uncertain future events within the control of the entity
False
A liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources
True
Study Notes
Liabilities and Contracts
- A liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources.
Obligating Events
- An obligating event is not limited to legal contracts; other events can also create an obligation.
Contingent Liabilities
- A contingent liability is a present obligation arising from past events, but it's uncertain if the obligation will actually lead to an outflow of resources.
Contingent Assets
- A contingent asset may arise from past events that are not within the control of the entity; confirmation is dependent on uncertain future events.
Legal Contracts
- A legal contract is not the only way to create an obligating event, and it's not a requirement for an obligation to exist.
Test your knowledge of IND AS 37 provisions, contingent liabilities, and contingent assets with this quiz. Explore the concepts of liabilities, obligating events, and resource outflows. Prepare for a deeper understanding of financial obligations and their impact on organizations.
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