Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Provisions and contigent liability
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John Moffat.
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- November 7, 2022 at 8:58 am #670821
Please advise me the conflict between the recognisation standard and definition of provision following the IAS 37.
IAS 37 states that: (Definition)
Provision is a liability of uncertain amount or timeRecognition standards
Provision should be recognised:
When a reliable estimate can be made of amount involved
Conflict here is in definition of liability of uncertain amount, while recognisation standard is realiable estimate amount
November 7, 2022 at 9:26 am #670831Reliable in this context does not mean 100% accurate. It means rational (or reasonable) and that risk and uncertainty has been taken into account when estimating the amount (i.e. that it is not just a guess 🙂 ) and that there will be a liability (i.e. it is not contingent on something else happening).
The extent to which this is examined in Paper FA is covered in our free lectures 🙂
November 7, 2022 at 10:29 am #670833Thanks your explaination, Mr. John. So “Reliable” means that there are reasonable basics or existence of basics to estimate value of provision, isn’t it?
November 8, 2022 at 7:44 am #670957Correct 🙂
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