Accounting Standard 4: Contingencies and Events Occurring after the Balance Sheet Date
A contingency is a condition or situation the ultimate outcome of which will be known or determined only on the occurrence or non-occurrence of uncertain future event/s.
Events occurring after the balance sheet date are those significant events both favourable and unfavourable that occur between the balance sheet date and the date on which the financial statements are approved.
Amount of a contingent loss should be provided for by a charge in P & L A/c if it is probable that future events will confirm that an asset has been impaired or a liability has been incurred as at the balance sheet date and a reasonable estimate of the amount of the loss can be made.
Existence of contingent loss should be disclosed if above conditions are not met, unless the possibility of loss is remote.
Contingent Gains if any, not to be recognised in the financial statements.
Material change in the position due to subsequent events be accounted or disclosed.
Proposed or declared dividend for the period should be adjusted.
Material event occurring after balance sheet date affecting the going concern assumption and financial position be appropriately dealt with in the accounts.
Contingencies or events occurring after the balance sheet date and the estimate of the financial effect of the same should be disclosed.
Note: The underlined paras/words have been withdrawn on issuance of AS 29 effective for accounting periods commencing on or after 1-4-2004.