12 September 2012
A company had made a contract of sales of goods on a condition that if it will be unable to deliver the goods till 30th april, 2012 it will pay 1 crore as compensation.
Now on 31st march, 2012 management concludes that it will unable to deliver the goods till 30th april, 2012 and it want to create provision of Rs. 1 crore.
Now my question is under which AS this provision will be covered. Whether it would be covered under AS-4, "Events occuring after balance sheet date" because contingency of event exist on balance sheet date or under AS-29, "Provisions, Contingent liablities, & Assets" because there is a present obligation arising from past event and amount can be measured using substantial degree of estimation
12 September 2012
AS 29 is applicable where Provisions are adjusted against the assets in the balance sheet. If there is no assets in the balance sheet then AS-4 is applicable
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