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As 04

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  • 1. ACCOUNTING STANDARD-4 CONTINGENCIES AND EVENTS OCCURING AFTER THE BALANCE SHEET DATE J.P., KAPUR & UBERAI
  • 2. PURPOSE
    • This statement deals with the treatment in the financial statements of:
    • Contingencies and.
    • Events occurring after the balance sheet date.
    • This statement does not deal with:
    • Liabilities of life assurance and general insurance enterprises arising from policies issued.
    • Obligations under retirement benefit plans.
    • Commitments arising from long-term lease contracts
    J.P., KAPUR & UBERAI
  • 3. CONTINGENCY
    • Contingency : is a condition or situation , the ultimate outcome of which, gain or loss , will be known or determined only on the occurrence , or non-occurrence , of one or more uncertain future events.
    J.P., KAPUR & UBERAI
  • 4. ACCOUNTING TREATMENT OF CONTINGENT LOSSES
    • If the contingency is likely to result in a loss, then it is prudent to provide for that loss in the financial statements.
    • The amount of a contingent loss should be provided for by a charge to the statement of profit and loss if:
    • It is probable that future events will confirm that, after taking into account any related probable recovery, an asset has been impaired or a liability has been incurred as at the balance sheet date .
    • A reasonable estimate of the amount of the resulting loss can be made.
    J.P., KAPUR & UBERAI
  • 5. ACCOUNTING TREATMENT OF CONTINGENT GAINS
    • Contingent gains should not be recognized in financial statements.
    J.P., KAPUR & UBERAI
  • 6. DISCLOSURE
    • If any of the specified two conditions are not met, the existence of a contingent loss should be disclosed in the financial statements as under, unless the possibility of a loss is remote:
    • Nature of contingency
    • The uncertainties which may effect the future outcome
    • An estimate of the financial effect, or a statement that such an estimate cannot be made.
    J.P., KAPUR & UBERAI
  • 7. EVENTS OCCURING AFTER THE BALANCE SHEET DATE
    • Events occurring after the balance sheet date: those significant events, both favourable and unfavourable , that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors in the case of a company, and by the corresponding approving authority in the case of any other entity.
    • Classification of Events:
    • Those which provide further evidence of conditions that existed at the balance sheet date; and
    • Those which are indicative of conditions that arose subsequent to the balance sheet date.
    J.P., KAPUR & UBERAI
  • 8. DISCLOSURE
    • The nature of the event
    • An estimate of the financial effect or a statement that such an estimate cannot be made.
    J.P., KAPUR & UBERAI

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