Summary
Summary Provisions and Contingent Liabilities IAS 37
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Summary of IAS37 Provisions and Contingent Liabilities
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Provisions, ContingentLiabilities and Assets
Definition of a provision
A liability where the timing and amount of settlement are uncertain
Recognition and Measurement
A provision is recognised if the following are present
A legal obligation existing at the reporting date because of a past event
More likely than not that settlement will cause an outflow of cash
A reliable estimate can be made
Journals: DR Expense CR Provision of Expense
Subsequent Measurement
Review and if necessary make an adjustment at each reporting period
Derecognition
A provision provides for only initially expected expenses. Excesses are
expensed, and surpluses must be reversed
Expense > Provision: DR Expense DR Provision CR Bank
Expense < Provision: DR Provision CR Expense CR Bank
Future Operating Losses
No liability exists thus no provision can be raised
Presentation
P/L expense and a line item on the SFP under liabilities
Disclosure
Expense in profit before tax note
A note to the financials
Brief description of nature, detail of uncertainties over time and amount of
expense
Reconciliation
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