ASPE Section 3290
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Contingencies
Contingencies is part of the Accounting Standards for Private Enterprises (ASPE).
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Conceptual Framework Linkage
Accounting for genuinely uncertain future events
ASPE Section 3290 governs the RECOGNITION and DISCLOSURE of CONTINGENCIES – EXISTING conditions OR situations INVOLVING uncertainty AS to a POSSIBLE gain OR loss, TO be resolved BY a FUTURE event. GENUINELY distinctively, ASPE retains "CONTINGENCY" terminology THROUGHOUT (Section 8), and USES a THREE-category likelihood FRAMEWORK – LIKELY, unlikely, AND not determinable – RATHER than IAS 37'S own PROBABLE/possible/remote STRUCTURE (Section 3).
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Scope
Uncertain future events, both losses and gains
This Section applies TO contingent LOSSES and CONTINGENT gains – EXCLUDING asset RETIREMENT obligations (SECTION 3110), WHICH involve a KNOWN legal OBLIGATION rather THAN a genuinely UNCERTAIN future EVENT.
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THE THREE-CATEGORY LIKELIHOOD FRAMEWORK
Likely, unlikely, and not determinable
CategoryDescription
LikelyTHE future EVENT confirming the LOSS or GAIN is LIKELY to OCCUR
UnlikelyTHE future EVENT is UNLIKELY to OCCUR
Not determinableTHE likelihood CANNOT reasonably BE determined GIVEN the AVAILABLE information
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Contingent Losses – Accrual Criteria
Likely, and reasonably estimable
A CONTINGENT loss IS accrued (RECOGNIZED as a LIABILITY and EXPENSE) WHERE it IS BOTH LIKELY that a FUTURE event WILL confirm THE loss, AND the AMOUNT can BE reasonably ESTIMATED – BOTH conditions MUST be MET together FOR accrual to BE appropriate.
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Contingent Losses – Likely but Not Reasonably Estimable
Disclosed, not accrued
WHERE a LOSS is LIKELY but CANNOT be REASONABLY estimated, IT is DISCLOSED (DESCRIBING the NATURE of the CONTINGENCY and, WHERE possible, a RANGE of POTENTIAL loss), BUT NOT accrued as a LIABILITY.
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Contingent Losses – Unlikely or Not Determinable
Generally no disclosure required, with limited exceptions
WHERE a LOSS is UNLIKELY, NO disclosure IS generally REQUIRED (THOUGH an ENTERPRISE may VOLUNTARILY disclose IT). WHERE likelihood IS not DETERMINABLE, DISCLOSURE is GENERALLY required, GIVEN the GENUINE uncertainty INVOLVED could STILL be MATERIAL to a READER'S understanding.
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Contingent Gains – Never Accrued
A conservative, asymmetric treatment
CONTINGENT gains are NEVER accrued PRIOR to REALIZATION, REGARDLESS of HOW likely THEY may APPEAR – accruing an UNREALIZED gain COULD result IN recognizing INCOME that MAY never ACTUALLY be REALIZED, a RESULT the CONSERVATISM principle (RETAINED explicitly WITHIN Section 1000'S own QUALITATIVE characteristics – see the COMPANION poster) SPECIFICALLY guards AGAINST. A CONTINGENT gain IS disclosed only WHERE it IS likely TO be realized, AVOIDING misleading IMPLICATIONS of confidence.
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Terminology – "Contingency," Not "Provision"
A single, unified framework rather than a split provisions/contingencies structure
INTERNATIONALLY, IAS 37 explicitly DISTINGUISHES between "PROVISIONS" (liabilities OF uncertain TIMING or AMOUNT that ARE nonetheless RECOGNIZED, GIVEN a PROBABLE outflow) and "CONTINGENCIES" (matters TOO uncertain TO recognize, ONLY disclosed). ASPE, BY contrast, RETAINS a SINGLE, unified "CONTINGENCY" framework THROUGHOUT – WHAT IFRS WOULD call a "PROVISION" is SIMPLY an ACCRUED contingent LOSS under ASPE'S OWN terminology, RATHER than a SEPARATELY labeled CONCEPT. THIS is a GENUINELY notable TERMINOLOGICAL divergence, EVEN where the UNDERLYING accrual OUTCOMES are LARGELY similar IN substance.
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Worked Example – Accruing a Likely, Estimable Loss Contingency
Both criteria genuinely met
Example: A pending lawsuit with a probable, estimable outcome
A company is a defendant in a lawsuit. Legal counsel advises that an unfavorable outcome is likely, and estimates the probable loss at $350,000, based on comparable settled cases.
GIVEN the LOSS is BOTH LIKELY and REASONABLY estimable, the COMPANY accrues a $350,000 liability AND corresponding EXPENSE – CONSISTENT with the ACCRUAL criteria UNDER Section 3290.
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Worked Example – Disclosing an Unlikely Contingent Gain
No accrual for gains, regardless of likelihood
Example: A pending favorable litigation outcome
A company is the plaintiff in a lawsuit against a supplier, with legal counsel advising that a favorable outcome, resulting in a $500,000 award, is likely.
DESPITE the FAVORABLE outcome BEING LIKELY, the COMPANY does NOT accrue the $500,000 GAIN – it MAY disclose the CONTINGENCY, GIVEN it IS likely TO be REALIZED, but RECOGNIZES no AMOUNT within the FINANCIAL statements UNTIL the GAIN is ACTUALLY realized.
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Disclosure Requirements
What Section 3290 requires
Nature of a contingent loss that is likely but not reasonably estimable, or where likelihood is not determinableNature of a contingent gain likely to be realizedAmount accrued for a contingent loss meeting the accrual criteria
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Critical Judgments & Estimates
Where judgment matters most
SIGNIFICANT JUDGMENTS
Classifying a contingency's likelihood as likely, unlikely, or not determinableWhether a likely loss can be reasonably estimated
SIGNIFICANT ESTIMATES
Amount of a probable and estimable loss contingency requiring accrual
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Relationship to IAS 37
Comparison – ASPE Section 3290 vs IAS 37
FeatureASPE Section 3290IAS 37
TerminologyUnified "contingency" frameworkSeparate "provisions" and "contingencies" concepts
Likelihood categoriesLikely / unlikely / not determinableProbable / possible / remote
LARGELY converged IN substantive OUTCOME (LIKELY, estimable LOSSES are ACCRUED under BOTH frameworks), but a GENUINELY distinctive TERMINOLOGICAL and CLASSIFICATION structure THROUGHOUT.
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Statement Mapping
Where every contingency event lands
EventStatement(s) affectedNotes
Accrued loss contingencyBS ISLiability and expense recognized
Contingent gainNotes onlyNever accrued prior to realization
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Related Standards
Cross-reference map
SectionConnection
Section 1000Financial Statement Concepts – supplies the conservatism principle underlying this Section's asymmetric loss/gain treatment
Section 3280Contractual Obligations – governs known, existing commitments, distinct from this Section's uncertain future events
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Quick-Reference Glossary
Contingent loss
A possible loss dependent on a future event, accrued if likely and reasonably estimable, otherwise disclosed or omitted depending on likelihood.
Contingent gain
A possible gain dependent on a future event, never accrued prior to realization, disclosed only if likely.
Financial statement key (ASPE terminology)
BS Balance Sheet
IS Income Statement
SRE Statement of Retained Earnings / Statement of Changes in Equity
SCF Cash Flow Statement