Question

IFRS - When do we record a contingent ASSET?

A.When it is probable and the amount can be reliably estimated.
B.At the end of the reporting period.
C.Only if it impacts shareholders' equity positively.
D.Never, contingent assets are never recorded.

Answer 1

In IFRS, a contingent asset is not recorded on the balance sheet but is disclosed in the financial statement notes when it is virtually certain. The correct answer to when we record a contingent asset is Never, as contingent assets are never recorded.

Step-by-step explanation:

We record a contingent asset when it is probable that an inflow of economic benefits will arise and the amount of the inflow can be measured reliably. According to the International Financial Reporting Standards (IFRS), despite meeting these conditions, a contingent asset is not recognized on the balance sheet. Instead, it is disclosed in the notes of financial statements when the realization of income is virtually certain. If the inflow is not probable, it is not recognized or disclosed.

To answer the question directly, the accurate option here would be D: Never, contingent assets are never recorded. The proper approach is to only take note of them in financial statement disclosures if they are likely to occur and can be measured with sufficient reliability.