With respect to contingent liabilities, the proposal suggests that current obligations are the only ones to consider when accounting for liabilities, which in themselves should be stated separately from the events which may dictate their occurrence. The uncertainty of the events themselves should also be disclosed, when presenting the measurements for the liability. Additionally, defining contingency with regard to the amount required to settle a liability rather than the probability of its occurrence will aid the goal of better recognition rather than simple disclosure.
Similarly, with respect to contingent assets, the proposed changes require elimination of the term “contingent asset,” and clarify that purely the rights associated with a past transaction or event give the ability to recognize an asset as such, to be controlled by an entity.
The amendment proposal also inquires into the need for further guidance on how the creation of a constructive obligation is incurred, and proposes to omit the criterion of probability recognition, due to the contingent liabilities proposed change of recognizing the liability and applying contingency as a term solely for the amount and not the possibility of the liability.
With regard to measurements, the proposal adds non-financial liability measurement to be determined in terms of the amount an entity would rationally pay to settle the present obligation, states the cash flow method as viable for measuring the above named liabilities, and mentions that a most likely outcome measurement for those types of liability is not consistent with the objective of the measurement standard, due to the expected value being used as the basis for measuring a provision for multiple items.
The proponents of the amendment agree that liabilities cannot be conditional, and obligations contingent on future events are not in themselves