ACCOUNTING STANDARD 4
CONTINGNECY AND EVENTS OCCURRING AFTER BALNCE SHEET DATE
1. This accounting standard is mandatory in nature for all entities.
2. Meaning of Contingency
Contingency is a situation or condition whose ultimate outcome is
gain or loss which will be known after the occurrence or non-
occurrence of one or more uncertain events.
3. Events occurring after balance sheet date
Events occurring after balance sheet date mean are those
significant events of gain or loss which occur between balance
sheet date and approval of accounts.
4. Events can be of two types
(a) Adjusting events
(b) Non Adjusting events
ADJUSTING EVENTS require adjustment in the financial statements
where as non-adjusting events require disclosure of event.
Understand with the help of presented Figure.
Eg. Money borrow on dated 1-1-2003
, In the given example there is a high probability that the borrower will
have not paid in stipulated time .Thus we have to make provisions on
dated 31/3/2003.
Treatment of contingency in balance sheet.
(i) Contingent Gain (Case A) –No treatment
(ii) Contingent loss (Case B)-
a) High probability and
b) Amount can be ascertained
(MAKE PROVISION FOR SUCH CONTINGENCY)
(iii) Remote possibility of loss (Case C)- No treatment
(iv) If Loss is less than 50% (Case D)- ( Give footnote of contingency
in balance sheet)
Case A
Contingent Gain mean’s Gain which are still uncertain & it
occurrence depend on future event. Due to concept of
conservatism such profit should not be recorded. If it is contingent
(uncertain).
For example:- Uncertain gain on sale of fixed asset
Uncertain Govt. grant
Uncertain lottery income
CONTINGNECY AND EVENTS OCCURRING AFTER BALNCE SHEET DATE
1. This accounting standard is mandatory in nature for all entities.
2. Meaning of Contingency
Contingency is a situation or condition whose ultimate outcome is
gain or loss which will be known after the occurrence or non-
occurrence of one or more uncertain events.
3. Events occurring after balance sheet date
Events occurring after balance sheet date mean are those
significant events of gain or loss which occur between balance
sheet date and approval of accounts.
4. Events can be of two types
(a) Adjusting events
(b) Non Adjusting events
ADJUSTING EVENTS require adjustment in the financial statements
where as non-adjusting events require disclosure of event.
Understand with the help of presented Figure.
Eg. Money borrow on dated 1-1-2003
, In the given example there is a high probability that the borrower will
have not paid in stipulated time .Thus we have to make provisions on
dated 31/3/2003.
Treatment of contingency in balance sheet.
(i) Contingent Gain (Case A) –No treatment
(ii) Contingent loss (Case B)-
a) High probability and
b) Amount can be ascertained
(MAKE PROVISION FOR SUCH CONTINGENCY)
(iii) Remote possibility of loss (Case C)- No treatment
(iv) If Loss is less than 50% (Case D)- ( Give footnote of contingency
in balance sheet)
Case A
Contingent Gain mean’s Gain which are still uncertain & it
occurrence depend on future event. Due to concept of
conservatism such profit should not be recorded. If it is contingent
(uncertain).
For example:- Uncertain gain on sale of fixed asset
Uncertain Govt. grant
Uncertain lottery income
