Question

Assume that Exxon accounts for contingencies using IAS 37. Prepare 3 paragraphs (4 sentences or less for each paragraph/question) addressing the following:

• Explain why you agree or don’t agree that Exxon’s contingent liability disclosures were adequate.
• Explain why you agree or don’t agree that IAS 37 provides sufficient guidance to provide users enough disclosure about environmental liabilities.
• How does the concept of “sustainability” relate to the concept of “environmental liabilities”?

Answer 1

IAS 37 states for the treatment of provisions, contingent liabilities etc, that are obligised to be presented in the books of accounts. I agree that Exxon’s contingent liability disclosures were adequate as it is shown in IAS 37.

Generally, Contingent liability are the possibility of loss by uncertain future events that are not within the control of any business. For example the bills discounting from the bank can be of contingent nature as one do not know if our receivables pay to bank on time or not.

Contingent liabilities also include obligations or the gaurentee given by the firm. Usually, the contingent liabilities are only shown as footnotes in financial statements as they are uncertain to happen.