Ind AS 37 |CA Final FR 2026 | Realistic Alternative Explained | Concepts | key words

"If the company has—please look closely at this word—a 'realistic alternative'. I'll repeat the word. If the company has a realistic alternative that allows it to avoid the present obligation. Mind my words: I have a realistic alternative. Shutting down the business is not a realistic alternative, but buying and bringing in a new asset is a realistic alternative, okay? So, if I have a realistic alternative to avoid the present obligation, then my event will not be called an 'obligating event' because I can simply avoid that present obligation. For example, I gave you an illustration connecting it to—uh, not decommissioning liability, but 'major inspection and overhauling' under Ind AS 16. If you remember, let me just revise it for you right now: suppose I have an airplane, and we are an aircraft company like Indigo. The DGCA tells me that I have to repair the airplane every 5 years. Well, I will not create a provision for that. You might ask, 'So sir, what will you do?' I won't make a provision because I have a realistic alternative: after 5 years, we can replace the airplane and bring in a new one. We can surrender that airplane if it is on lease, or if we bought it, we can sell it and buy another one. I have this option, and this alternative is a realistic alternative. Think about how people change their mobile phones. We often don't get our mobiles repaired; we just sell them and buy new ones. Many people do this, and it's not about throwing your money around. Now, what I am saying is that if a company has a realistic alternative to avoid a present obligation, we won't call the event an obligating event, and we will not record the present obligation in the books. We will simply state that as the company has a realistic alternative, the company should not record the provision, and it's clear." #RealisticAlternative #PresentObligation #ObligatingEvent #Provisions #IndAS16 #MajorInspection #DecommissioningLiability #AccountingStandards