Ind AS provisions and contingent liabilities
Reviewed by CA Divyanshu Sengar · Last reviewed 29 August 2026
Ind AS 37 governs when an environmental or climate-related obligation must be recognised as a provision rather than merely disclosed or ignored.
Finin2min Summary — in 2 Minutes
Ind AS 37 governs when an environmental or climate-related obligation must be recognised as a provision rather than merely disclosed or ignored.
Official source and legal ownership
What this covers
Ind AS 37 (Provisions, Contingent Liabilities and Contingent Assets) sets the recognition test for environmental and climate-related obligations in financial statements: a provision is recognised only where there is a present obligation (legal or constructive) as a result of a past event, an outflow of resources is probable, and the amount can be reliably estimated.
How the three-way distinction works
Where all three conditions are met, a provision is recognised on the balance sheet (for example, an environmental remediation obligation the company is legally required to undertake); where an outflow is only possible (not probable) or cannot be reliably estimated, it is instead disclosed as a contingent liability in the notes; where recognition criteria are clearly not met and the possibility is remote, no disclosure is required at all.
Why it matters
This recognition test is exactly where BRSR's climate and environmental risk narrative should connect to the financial statements (see Climate risk governance and financial statements) - a company describing a specific, probable environmental liability in its BRSR while carrying no corresponding provision or contingent-liability note is a discrepancy worth resolving before either document is finalised.