Contingent liability and provision

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Chintan Patel (Querist)
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10 June 2015 Hello Everyone!

Can anyone please explain when does a contingent liability become a provision with an example?

Thank You!

JUGAL PATEL

JUGAL PATEL (Expert)
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10 June 2015 Suppose one litigation in custom was going on & company at initial level win the case so its a contingent liability. suppose the department goes to Tribunal & win the case then it has become Liability

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CS RAJESH C.CHOUDHARY

CS RAJESH C.CHOUDHARY (Expert)
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10 June 2015 Agree with Expert..

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Kaushik Joshi

Kaushik Joshi (Expert)
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11 June 2015 Dear Chintan
Please understand that provision is made when there is a certain liability involved. A continent liability is not a real liability but may or may not become a liability in future. It'll depend on facts and circumstances.

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Chintan Patel

Chintan Patel (Querist)
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11 June 2015 Thank You Very much for your valuable replies!
So, Can it be summed up like this:

Liability More Probable to occur: PROVISION

Medium Probability : CONTINGENT LIABILITY

Less Probable : Neither Provision nor Contingent Liability

Example: What if it is more probable that the company is going to win the case and there is very less probability of losing?
Should the Company still disclose contingent liability?

Thank You!

CA. Sunil Gokhale

CA. Sunil Gokhale (Expert)
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17 June 2015 Contingent liability is one which may or may not arise, in other words it is uncertain. The probability of the outcome does not matter. Disclosure is required even if there is 0.01% chance of liability arising.

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