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Please explain..

CMA Ratna sandeep (CA Final) (188 Points)

02 February 2013

friends please explain the following statement as Per AS-29

" Present Obligation must be Probable causing outflow of resources EMBODYING ECONOMIC BENEFITS "

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5 Replies

CA girl (Article Trainee-CA Final) (1942 Points)
Replied 02 February 2013

Hey :

Present Obligation means: There should be a condition existing as on the date of Balance Sheet that makes the obligation probable

Probable means: According to AS-29...There are more chances for the happening of an event...than the non happening of that event.

Outflow of resources embodying future benfits means: There are chances of an outflow of resources from the organisation which will bring economic benefits in return.

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Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 02 February 2013

As per AS-4, A present obligation(not a certain liability, you can say as immature liability) is aobligation the existence of which at the balance sheet date is considered as probabl(more likely than not)e. An obligation is recognised as provision only the 3 conditions are satisfied:

(i) there is a present obligation as a result of a past event;

(ii) it is probable(more likely than not i.e 50% approx) that an outflow of #resources embodying economic benefits(#-means assets of the co.) will be required to settle the obligation; and

(iii) a reliable estimate can be made of the amount of the obligation.

The opposite of Prseent opbligation is possible obligation whose exisetnce is not probable at B/s date.

CMA Ratna sandeep (CA Final) (188 Points)
Replied 02 February 2013

Thank you SAURABH and Divya.

I Could understand more if you throw an example.

CA girl (Article Trainee-CA Final) (1942 Points)
Replied 02 February 2013

Hey listen...Things like this are complicated to explain online....I suggest you to get the book" Students Guide to Accounting Standards" by D.S Rawat...you can understand better.

CMA Ratna sandeep (CA Final) (188 Points)
Replied 02 February 2013

Originally posted by : Divya Barathi
	Hey listen...Things like this are complicated to explain online....I suggest you to get the book" Students Guide to Accounting Standards" by D.S Rawat...you can understand better.