Contingent liability and provision

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Narsing (Querist)
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22 August 2013 Hi, what is the meaning of present obligation and possible obligation in relation with contingent liability and provision?

Ganeshbabu K

Ganeshbabu K (Expert)
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22 August 2013 1)An obligation is present obligation if based on evidence available , its existence on the balance sheet date is "considered probable",,i.e, more likely than not.

2)An obligation is a possible obligation if based on the evidence available,its existance at the balance sheet date is "considered not probable"

Please note that for contingent liability the existance on possible obligation should be "Not probable" where as for provisions it should be "probable"

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