Dear Members
I have one below query (related to Banks) and appreciate to have your views
"We had some contingeny in our books (Shown under contingeny and commitments)and corrsponding provision against it in other liabilities (provision against off balance sheet obligations). Auditors were of the view that if you have recorded the liability by creating the provision then there isn't any contingency and therefore it need to be reversed. I believe this is impairment in contingeny and as like advances we have to show the both contingency and its provision/impairment in other liabilities"
Need your views, whether or not contingency need to be reversed.
The term contingencies and commitments appears near the end of a balance sheet without an amount in order to direct a readerâs attention to the disclosures included in the "notes to the financial statements". No provision can be recognised.
An amount is not shown for a variety of reasons. For example, a chain of retail stores may have signed five-year, noncancellable leases to rent retail space for $1 million per year. This commitment needs to be disclosed to the readers of the balance sheet. However, if none of the $5 million is actually due as of the balance sheet date, there is no liability amount to be recorded in a liability account.
I hope my reply will help you
Comments are appreciated.
Agreed~
Dada Bank mein contingency and commitment non funded exposure ki hote hai like letter of credit,letter of gurantee etc etc....
so there are no funds involved ...means the bank has commited to pay if the actual party defaults but as the actual party has not defaulted thus it appears in contingencies rather than liabilities...
liabilities are never imparied!!! if there is uncertaininty!!!! we would book provision and make reversals later once actual billing is done....
when no uncertainity of timing and amount is involved we book liability.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by moniacca</i>
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The term contingencies and commitments appears near the end of a balance sheet without an amount in order to direct a readerâs attention to the disclosures included in the "notes to the financial statements". No provision can be recognised.
An amount is not shown for a variety of reasons. For example, a chain of retail stores may have signed five-year, noncancellable leases to rent retail space for $1 million per year. This commitment needs to be disclosed to the readers of the balance sheet. However, if none of the $5 million is actually due as of the balance sheet date, there is no liability amount to be recorded in a liability account.
I hope my reply will help you
Comments are appreciated.
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Could Anybody help me how to recognize following obligations?
Date of the Contract 25.11.2009
5.3.1. In two years after signing the present contract ensure hazelnut planting on the property;
5.3.2. In two years make an investment under the conditions stated in article 5.3.1 not less than EUR 2,500,000;
5.3.3. Ensure the employment no less than 8 people on the permanent basis, and additionally no less than 70 people for seasonal works under the conditions stated in article 5.3.1
Please elaborate your query in the present condition it is not in a form to under stand propery