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Previous ICDS Articles:

ICDS I ICDS II ICDS III
ICDS IV ICDS V ICDS VI
ICDS VII ICDS VIII ICDS IX

In this article, we will explain about ICDS 10 and its difference with respective Notified AS.

ICDS 10 Contingent Liabilities and Contingent Assets

ICDS 10 deals with provisions, contingent liabilities and contingent assets, except those resulting from financial instruments, executory contracts and others arising in insurance business.

Recognition

1. Provision shall be recognized when:

i. there is one present obligation as a result of a past event

ii. it is reasonably certain that the obligation will be settled

iii. a reliable estimate of amount of obligation can be made

2. No provisions for future operational cost will be recognized

3. Contingent assets are assessed continually and when it becomes reasonably certain that the inflow of economic benefit will arise, the asset and related income are recognized in the previous year in which the change occurs

Measurement

1. The amount of provision shall be recognized to the extent that its estimate is based on the expenditure required to settle the present obligation. Discounting will not be done on the present value of provision amount

2. The amount of asset and related income shall be recognized to the extent that its estimate is based on the value of economic benefit arising from such asset. Discounting will not be done on present value of amount of asset and related income

3. If any reimbursement is expected to be made by any third party in order to settle the provision, then such reimbursement will be recognized only when it is reasonably certain that the reimbursement amount will be received

4. No provision shall be made for those costs, which the entity is not liable for payment in case the third party fails to pay

Review

1. Provision shall be reviewed at the end of each previous year, if it is reasonably certain that an outflow of economic resources will not be required to settle the provision then such provision should be reversed

2. An asset and related income recognized shall be reviewed at the end of each previous year, if it is reasonably certain that an inflow of economic benefits will not arise then such asset and related income should be reversed

Note: A provision shall be used only for expenditures for which the provision was originally made.

Disclosure 

Disclosure shall be made in respect of:

1. a brief description of the nature of the obligation / asset and related income

2. the carrying amount at the beginning and at the end of the year

3. additional provision made/ asset and related income recognized during the year

4. amount used and charged against the provision

5. amount of provision/ asset and related income reversed during the year.

Comparison of ICDS 10 and AS 29

Sl. No. Basis ICDS 10 AS 29
1. Recognition of provision Provision shall be recognized when it is reasonably certain that an outflow of economic resources will not be required to settle the obligation Provision shall be recognized when it is probable that an outflow of economic resources will not be required to settle the obligation
2. Recognition of contingent asset Contingent Asset is recognised when it is reasonably certain that inflow of economic benefit will arise Contingent Asset is recognised when inflow of economic benefit is virtually certain
3. Reversal of provision If it is reasonably certain that an outflow of economic resources will not be required to settle the provision then such provision should be reversed If it is probable that an outflow of economic resources will not be required to settle the provision then such provision should be reversed
4. Reversal of Contingent asset If it is reasonably certain that an inflow of economic benefits will not arise then such asset and related income should be reversed If it is probable that an inflow of economic benefits will not arise then such asset and related income should be reversed
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