Understanding The Concepts Under the AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets

Understanding the concepts under
the AASB 137 ‘Provisions,
Contingent Liabilities and
Contingent
Assets

INTRODUCTION
 The two ASX listed companies are Pelican Resource Limited and Rio Tinto PLC.
 Pelican Resource Limited Company is based on mineral exploration from the
region in Western Australia and Philippines, and Rio Tinto PLC Company based
on mining and metals industry in multinational Anglo Australian region.
 In this paper explains about the two ASX listed companies 3year annual report
and their different source of fund, identifying the percentage of funds they
generate internally and externally and the merits and demerits of different
sources of funds.
 the key provision under AASB 137 of their annual reports on provisions,
contingent liabilities and contingent Assets.

SOURCES OF FUNDING
Pelican Resource Ltd
• Shareholder’s fund uses to cover the liability from its assets which
implies that it is good for a company to generate the fund to repay the
debt.
• Revenue is the earning of the income of the company that it attains
from sales of goods and services of a company.
• Security deposits is the extra amount that is to be paid for future
security purpose.

SOURCES OF FUNDING
Rio Tinto Plc
 Retained earnings is a profit that earned after selling a product or any
service is more than its cost of the product.
 Equity is generating amounts by selling the part of shares to investors it
also known as equity funding.
 Borrowings increase the debt of any company and it is used for any new
investment or any acquisition.

INTERNAL AND
EXTERNAL FUND
Internal and external funds are generated through sales of asset, retained
earnings and debt of the company whereas the external sources are raised
through banks, financial institutions in terms of loans, debentures,
deposits, leases or commercial paper.

TYPES OF LIABILITIES IN
BALANCE SHEET
 Borrowings: The recognition of the borrowings which has been
done upon the fair value upon the transaction cost of net worth.
There is measurement of earnings through which there is amortized
costs.
 Deferred tax liability: It can be stated as the provision that has
been made in the current year due to some purpose related to the
taxation. The amount of money that has been due in the account of
current receivable, this happens as it cannot be taxed.

KEY PROVISIONS UNDER
THE AASB 137
 Contingent liabilities: The Contingent word that is being used
are for the liabilities and assets are not being identified, as per the
Accounting Standard AASB 137. The liabilities that has not been
reached the criteria of certification is being termed as “Liability”.
 Provisions: As per the Accounting Standard AASB 137, the
amount which has been recognized as liabilities can be considered
as provisions and the it is being related to the revenue recognition.
The trade payables do consist of accruals very often, thus
provisions have been separated.

IMPLICATION OF AASB 137
In the Accounting Standard AASB 137, there has been references of
provisions and contingent liabilities in the annual report. There is necessity
of some economic advantages which is for the settlement of commitment.
As per the Accounting Standard AASB 137 the contingent liability has some
uncertainty or cannot be measured reliably.

MEASUREMENT BASIS
o Cash and cash equivalent: The account cash and cash equivalent does
consist of demand deposits, current account and cash in hand.
o Plant and equipment: The items that has been recorded does have
different uses which has been accounted separately. In recording the
work-in-progress, the items i.e. cost of material, labor and services are
included.
o Inventories: This account is being measured on the net realizable value
and there has been determination of costs by the first in first out method.

CONCLUSION
The analysis that is being done on the Pelican Resource Limited
and Rio Tinto PLC, does have various sources of funds which
includes retained earnings, borrowings, equity shares are all
discussed in that report. Evaluation is being done based on the
external and internal funds that the organization have. Lastly, the
provisions of AASB137 that the organizations use are all
discussed to get a better understanding.

REFERENCES
 Adhariani, D., Sciulli, N. and Clift, R., 2017. Quantitative Optimisation Model, Results and Discussion.
In Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective (pp. 209-
284). Palgrave Macmillan, Cham.
 Chabrak, N., Cooper, C., Williams, P.F. and Catchpowle, L., 2016, July. Accounting and the third enclosure
movement. In Asia-Pacific Interdisciplinary Research in Accounting Conference.
 Clarke, E.A. and Wilson, M., 2018. Accounting: An Introduction to Principles and Practice 9ed. Cengage AU.
 Costa, I.L.D.S., Correia, T.D.S., Machado, M.R. and Lucena, W.G.L., 2017. Disclosure dos Passivos Contingentes:
Análise Comparativa entre Empresas de Mercado Aberto no Brasil e na Austrália. Pensar Contábil, 19(69).
 Hasibuan, R.P.S. and Syahrial, H., 2019, August. Analysis Of The Implementation Effects Of Accrual-Based
Governmental Accounting Standards On The Financial Statement Qualities. In Proceeding ICOPOID 2019 The
2nd International Conference on Politic of Islamic Development (Vol. 1, No. 1, pp. 18-29).
 Ijiri, Y., 2018. An Introduction to Corporate Accounting Standards: A Review. Accounting, Economics, and Law:
A Convivium, 8(1).

THANK YOU