Contingent asset [Resolved]

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 April 2012 Dear members good morning to all.
I have a query on above mentioned topic. Is there any concept called contingent asset ? if yes, how to disclose it in the balance sheet of business entity?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 April 2012 Please read the concerned portion of AS 29 which is reproduced below.

30. An enterprise should not recognise a contingent asset.
31. Contingent assets usually arise from unplanned or other unexpected
events that give rise to the possibility of an inflow of economic benefits to
the enterprise. An example is a claim that an enterprise is pursuing through
legal processes, where the outcome is uncertain.
32. Contingent assets are not recognised in financial statements since this
may result in the recognition of income that may never be realised. However,
when the realisation of income is virtually certain, then the related asset is
not a contingent asset and its recognition is appropriate.
33. A contingent asset is not disclosed in the financial statements. It is
usually disclosed in the report of the approving authority (Board of Directors
in the case of a company, and, the corresponding approving authority in the
case of any other enterprise), where an inflow of economic benefits is
probable.
34. Contingent assets are assessed continually and if it has become virtually
certain that an inflow of economic benefits will arise, the asset and the related
income are recognised in the financial statements of the period in which the
change occurs.

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