diff --git a/x/interchaintxs/keeper/ibc_handlers.go b/x/interchaintxs/keeper/ibc_handlers.go
index 7644b0447..01253cdba 100644
--- a/x/interchaintxs/keeper/ibc_handlers.go
+++ b/x/interchaintxs/keeper/ibc_handlers.go
@@ -34,28 +34,46 @@ func (k *Keeper) outOfGasRecovery(
 
 		k.Logger(ctx).Debug("Out of gas", "Gas meter", gasMeter.String())
 		k.contractManagerKeeper.AddContractFailure(ctx, packet.SourceChannel, senderAddress.String(), packet.GetSequence(), failureAckType)
-		// FIXME: add distribution call
 	}
 }
 
-func (k *Keeper) createCachedContext(ctx sdk.Context) (cacheCtx sdk.Context, writeFn func(), newGasMeter sdk.GasMeter) {
-	gasLeft := ctx.GasMeter().Limit() - ctx.GasMeter().GasConsumed()
+// createCachedContext creates a cached context for handling Sudo calls to CosmWasm smart-contracts.
+// If there is an error during Sudo call, we can safely revert changes made in cached context.
+func (k *Keeper) createCachedContext(ctx sdk.Context) (sdk.Context, func(), sdk.GasMeter) {
+	gasMeter := ctx.GasMeter()
+	// determines type of gas meter by its prefix:
+	// * BasicGasMeter - basic gas meter which is used for processing tx directly in block;
+	// * InfiniteGasMeter - is used to process txs during simulation calls. We don't need to create a limit for such meter,
+	// since it's infinite.
+	gasMeterIsLimited := strings.HasPrefix(ctx.GasMeter().String(), "BasicGasMeter")
+
+	cacheCtx, writeFn := ctx.CacheContext()
+
+	// if gas meter is limited:
+	// 1. calculate how much free gas left we have for a Sudo call;
+	// 2. If gasLeft less than reserved gas (GasReserved), we set gas limit for cached context to zero, meaning we can't
+	// 		process Sudo call;
+	// 3. If we have more gas left than reserved gas (GasReserved) for Sudo call, we set gas limit for cached context to
+	// 		difference between gas left and reserved gas: (gasLeft - GasReserve);
+	//
+	// GasReserve is the amount of gas on the context gas meter we need to reserve in order to add contract failure to keeper
+	// and process failed Sudo call
+	if gasMeterIsLimited {
+		gasLeft := gasMeter.Limit() - gasMeter.GasConsumed()
+
+		var newLimit uint64
+		if gasLeft < GasReserve {
+			newLimit = 0
+		} else {
+			newLimit = gasLeft - GasReserve
+		}
 
-	var newLimit uint64
-	if gasLeft < GasReserve {
-		newLimit = 0
-	} else {
-		newLimit = gasLeft - GasReserve
+		gasMeter = sdk.NewGasMeter(newLimit)
 	}
 
-	newGasMeter = sdk.NewGasMeter(newLimit)
-
-	cacheCtx, writeFn = ctx.CacheContext()
-	if strings.HasPrefix(ctx.GasMeter().String(), "BasicGasMeter") {
-		cacheCtx = ctx.WithGasMeter(newGasMeter)
-	}
+	cacheCtx = cacheCtx.WithGasMeter(gasMeter)
 
-	return
+	return cacheCtx, writeFn, gasMeter
 }
 
 // HandleAcknowledgement passes the acknowledgement data to the appropriate contract via a Sudo call.
diff --git a/x/transfer/ibc_handlers.go b/x/transfer/ibc_handlers.go
index ddc4eb51a..9ac40d335 100644
--- a/x/transfer/ibc_handlers.go
+++ b/x/transfer/ibc_handlers.go
@@ -37,24 +37,43 @@ func (im IBCModule) outOfGasRecovery(
 	}
 }
 
-func (im IBCModule) createCachedContext(ctx sdk.Context) (cacheCtx sdk.Context, writeFn func(), newGasMeter sdk.GasMeter) {
-	gasLeft := ctx.GasMeter().Limit() - ctx.GasMeter().GasConsumed()
+// createCachedContext creates a cached context for handling Sudo calls to CosmWasm smart-contracts.
+// If there is an error during Sudo call, we can safely revert changes made in cached context.
+func (im *IBCModule) createCachedContext(ctx sdk.Context) (sdk.Context, func(), sdk.GasMeter) {
+	gasMeter := ctx.GasMeter()
+	// determines type of gas meter by its prefix:
+	// * BasicGasMeter - basic gas meter which is used for processing tx directly in block;
+	// * InfiniteGasMeter - is used to process txs during simulation calls. We don't need to create a limit for such meter,
+	// since it's infinite.
+	gasMeterIsLimited := strings.HasPrefix(ctx.GasMeter().String(), "BasicGasMeter")
+
+	cacheCtx, writeFn := ctx.CacheContext()
+
+	// if gas meter is limited:
+	// 1. calculate how much free gas left we have for a Sudo call;
+	// 2. If gasLeft less than reserved gas (GasReserved), we set gas limit for cached context to zero, meaning we can't
+	// 		process Sudo call;
+	// 3. If we have more gas left than reserved gas (GasReserved) for Sudo call, we set gas limit for cached context to
+	// 		difference between gas left and reserved gas: (gasLeft - GasReserve);
+	//
+	// GasReserve is the amount of gas on the context gas meter we need to reserve in order to add contract failure to keeper
+	// and process failed Sudo call
+	if gasMeterIsLimited {
+		gasLeft := gasMeter.Limit() - gasMeter.GasConsumed()
+
+		var newLimit uint64
+		if gasLeft < GasReserve {
+			newLimit = 0
+		} else {
+			newLimit = gasLeft - GasReserve
+		}
 
-	var newLimit uint64
-	if gasLeft < GasReserve {
-		newLimit = 0
-	} else {
-		newLimit = gasLeft - GasReserve
+		gasMeter = sdk.NewGasMeter(newLimit)
 	}
 
-	newGasMeter = sdk.NewGasMeter(newLimit)
-
-	cacheCtx, writeFn = ctx.CacheContext()
-	if strings.HasPrefix(ctx.GasMeter().String(), "BasicGasMeter") {
-		cacheCtx = ctx.WithGasMeter(newGasMeter)
-	}
+	cacheCtx = cacheCtx.WithGasMeter(gasMeter)
 
-	return
+	return cacheCtx, writeFn, gasMeter
 }
 
 // HandleAcknowledgement passes the acknowledgement data to the appropriate contract via a Sudo call.