I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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2.2 Contingent assets 

IAS 37 defines a 

contingent asset 

as: 

'a possible asset that arises from past events and whose existence will be confirmed only by the 

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the 

entity'.   

(para. 10) 

 

A contingent asset must not be recognised in the accounts, but should be disclosed if it is probable that 

the economic benefits associated with the asset will flow to the entity (IAS 37, paras. 33–34). 

A brief description of the contingent asset should be provided, along with an estimate of its likely 

financial effect (IAS 37, para. 89). 

If the flow of economic benefits associated with the contingent asset becomes virtually certain, it should 

then be recognised as an asset in the statement of financial position, as it is no longer a contingent asset 

(IAS 37, para. 33). 

For example, a company expects to receive damages of $100,000 and this is virtually certain. An asset 

is recognised. If, however, the company expects to probably receive damages of $100,000, a contingent