Contingent Assets - Procedures

Printer-friendly version

1. Purpose and Objectives

The purpose of these procedures is to ensure the appropriate recognition and recording of contingent assets of the University.

2. Definitions, Terms, Acronyms

Contingent asset - an asset that may arise depending on the outcome of a future event.

3. Procedures Scope/Coverage

These procedures apply to all University staff who become aware of situations which may give rise to contingent assets.

4. Procedures Statement

AASB137 Provisions, Contingent Liabilities and Contingent Assets defines a contingent asset as a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. An example is a claim that an entity is pursuing through legal processes, where the outcome is uncertain.

Contingent assets are continually assessed and if they become certain that an inflow of economic benefits will arise the asset and the related income are recognised in the financial statements in the period that the change from probable to certain occurs.

5. Recording of Contingent Assets

Section 26 of the Financial and Performance Management Standard 2009 requires that the University keep a register of contingent assets. The register of contingent assets is maintained by the Accounting and Reporting Section within the FBS Division.

Organisational units are required to notify the Accounting and Reporting Section if they become aware of a contingent asset or circumstances where a contingent asset may arise.

The following information pertaining to each contingent asset is required for entry into the register:

  • a description of the contingency;
  • the contingency's value, if this can be reliably measured;
  • the way in which the contingency arose, for example, its source;
  • any action taken relating to the contingency.

6. Reporting of Contingent Assets

Contingent assets are not recognised in the financial statements, however disclosure of a brief description of the nature of the contingent asset at the reporting date, and where practicable, an estimate of the financial effect is required by way of a note to the financial statements.