Difference Between AS 29 and Ind AS 37

Accounting Standard 29 (REVISED): AS 29 (Revised) came into effect in respect of accounting periods commenced on or after 1-4-2004. The objective of AS 29 (Revised) is to ensure that appropriate recognition criteria and measurement bases are applied to provisions and contingent liabilities and sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The objective of AS 29 (Revised) is also to lay down appropriate accounting for contingent assets.

Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

The objective of Ind AS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount.

Ind AS 37 prescribes the accounting and disclosures for provisions, contingent liabilities and contingent assets, except:

  • (a) those resulting from executory contracts, except where the contract is onerous; and
  • (b) those covered by another Standard.

Ind AS 37 also do not apply to financial instruments (including guarantees) that are within the scope of Ind AS 109, Financial Instruments.

Difference Between AS 29 and Ind AS 37

AS 29 Ind AS 37
AS 29 prohibits discounting of provisions except in case of decommissioning, restoration and other similar liabilities, that are considered as a part of cost of PPE. Ind AS 37 requires discounting the amounts of provision, if the effect of time value of money is material.
AS 29 requires the disclosure of contingent assets in the report of approving authority but prohibits the disclosure of the same in financial statements. Ind AS 37 requires the disclosure of contingent assets in financial statements.

AS 29 requires creation of provision as a result of:

  • Normal Business Practices
  • Customs
  • Desire to maintain good business relationships or
  • To act in equitable manner.

Ind AS 37 requires creation of provision in respect of constructive obligation.

Consequently, the terms “legal obligation” and “constructive obligation” have been inserted and defined in Ind AS 37.

There is no such provision in the AS 29. Ind AS 37 specifically states that before a separate provision is created for “onerous contract”, an impairment loss, if any, on the assets dedicated or allocated for such contract must be recognized.
AS 29 is silent on these issues.

Ind AS 37 provides guidance on:

  • Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
  • Liabilities arising from participating in Specific Market - Waste Electrical and Electronic Equipment
  • Levies (Imposed by Government)
AS 29 states that no provision is to be made for identifiable future operating losses up to the date of restructuring. Ind AS 37 states that no provision is to be made for identifiable future operating losses up to the date of restructuring, except losses related to onerous contract.