ICDS 10 for better Computation of Income chargeable under "Profits and Gains from Business and Profession" and " income from Other Sources"

1. ICDS-X: Provisions, Contingent Liabilities
and Contingent Assets

2. Scope
• ICDS X deals with provisions, contingent liabilities and contingent assets, except
those:
– resulting from financial instruments;
– resulting from executory contracts;
– arising in insurance business from contracts with policyholders; and
– covered by another ICDS.
• This ICDS does not deal with the recognition of revenue (as it is covered in ICDS
IV- Revenue Recognition.)
• The term ‘provision’ is also used in the context of items such as depreciation,
impairment of assets and doubtful debts which are adjustments to the carrying
amounts of assets and are not addressed in this ICDS.

3. DEFINITIONS
Provisions
Liability which can
be Measured in
Substantial
Degree of
Estimates
Contingent Liabilities
Possible
Obligation Arising
from past events,
which exists only
by happening or
non happening of
future uncertain
events
Present Obligation
arising from past
event NOT
recognized
because
Outflow of Resources are
NOT certain
Reliable estimates of amount
cannot be made
Contingent
Assets
Possible Asset
Arising from past
events, which
exists only by
happening or non
happening of
future uncertain
events

4. Recognition
Provision
Recognized when-
1. If there is a present
obligation from past event
2. Outflow of Resources are
Reasonably Certain
3. Reliable estimate of
amount can be made
Not to Recognize –
1. When cost need to operate
in future.
Contingent Liability
Shall not be
Recognized.
Contingent Assets
Shall not be Recognized
BUT,
When Inflow of
economic Benefit will
Arise from Assets, then
Recognize.

5. Best Estimate
• The amount recognized as a provision shall be the best estimate of the
expenditure required to settle the present obligation at the end of the
previous year. The amount of a provision shall not be discounted to its
present value.
• The amount recognized as asset and related income shall be the best
estimate of the value of economic benefit arising at the end of the
previous year. The amount and related income shall not be discounted to
its present value.

6. Reimbursements
• Where some or all of the expenditure required to settle a provision is
expected to be reimbursed by another party, the reimbursement shall be
recognized when it is reasonably certain that reimbursement will be
received if the person settles the obligation. The amount recognized for
the reimbursement shall not exceed the amount of the provision.
• Where a person is not liable for payment of costs in case the third party
fails to pay, no provision shall be made for those costs.
• An obligation, for which a person is jointly and severally liable, is a
contingent liability to the extent that it is expected that the obligation will
be settled by the other parties.(ask sir)

7. Review
• Provisions shall be reviewed at the end of each previous year and adjusted
to reflect the current best estimate. If it is no longer reasonably certain
that an outflow of resources embodying economic benefits will be
required to settle the obligation, the provision should be reversed.
• An asset and related income recognized as provided in para 11 shall be
reviewed at the end of each previous year and adjusted to reflect the
current best estimate. If it is no longer reasonably certain that an inflow of
economic benefits will arise, the asset and related income shall be
reversed.

8. • Use of Provisions
 Only for the Expenditure for which the Provision is made
• Transitional Provisions
 All the provisions or assets and related income shall be recognized for
the previous year commencing on or after 1st day of April, 2016 in
accordance with the provisions of this standard after taking into
account the amount recognized, if any, for the same for any previous
year ending on or before 31st day of March,2016.

9. Disclosure
Provision
1. Nature of Obligation
2. Carrying Amount - at Beginning & at End
3. Additional Provision Made & Increase in
Existing Provisions
4. Amount Incurred & charged against the
Provision
5. Unused amount Reversed
6. Amount of any expected reimbursement,
stating the amount of any asset that has been
recognized for that expected reimbursement.
Assets & Related Income
1. Nature of Asset
2. Carrying Amount at
Beginning & at End
3. Additional income
recognized Including increase
in existing income recognized
4. Amount Reversed during
the year

10. THANK YOU