Chapter 18

PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS


Sec. 1. Scope. This Chapter covers the definition, recognition, measurement, related disclosures and presentation of Provisions, Contingent Liabilities and Contingent Assets prescribed under PPSAS 19.

Sec. 2. Definition of terms. The following terms are used in this Standard with the meanings specified:

a. Constructive Obligation - is an obligation that derives from an entity's actions where:

1. By an established pattern of past practice, published policies, or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and

2. As a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

b. Contingent Asset - is a possible asset that arises 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.

c. Contingent Liability is:

1. A possible obligation that arises 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; or

2. A present obligation that arises from past events, but is not recognized because:

i. It is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or

ii. The amount of the obligation cannot be measured with sufficient reliability. (Par. 18, PPSAS 19)

d. Executory Contracts - are contracts under which neither party has performed any of its obligations, or both parties have partially performed their obligations to an equal extent. (Par. 18, PPSAS 19)



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