Under IAS 37, a contingent liability must be disclosed when probability is in which range?

Under IAS 37, a contingent liability must be disclosed when probability is in which range?

• A. Record
• B. Disclose
• C. Nothing
• D. Recognize In Income Statement

Answer: (B)

Under IAS 37, contingent liabilities are managed using three probability levels: remote, possible, and probable. A present obligation is recognized as a provision only when its outflow is probable. If the obligation is only possible but not probable, you disclose it in the notes to the financial statements. If the chance of an outflow is remote, no disclosure is required. So, disclosure is needed when the probability is in the possible range—neither remote nor certain. The other treatments don’t apply here: a probable outcome leads to recognizing a provision (not just disclosure), and a remote outcome requires no disclosure at all. Recognizing in the income statement would occur only if a provision is established due to a probable outflow.

Under IAS 37, contingent liabilities are managed using three probability levels: remote, possible, and probable. A present obligation is recognized as a provision only when its outflow is probable. If the obligation is only possible but not probable, you disclose it in the notes to the financial statements. If the chance of an outflow is remote, no disclosure is required.

So, disclosure is needed when the probability is in the possible range—neither remote nor certain. The other treatments don’t apply here: a probable outcome leads to recognizing a provision (not just disclosure), and a remote outcome requires no disclosure at all. Recognizing in the income statement would occur only if a provision is established due to a probable outflow.