Probable outflow of resources
Under IAS 37, probability is one of the conditions for recognising a provision, together with a present obligation from a past event and a reliable estimate. Assess the relevant obligation and evidence at the reporting date. Where the outflow is not probable, a contingent liability may require disclosure unless the possibility of an outflow is remote. Do not treat probability alone as sufficient without an obligation.
Worked example
An entity has a present legal obligation from a lawsuit and advisers assess a 70% chance of payment. If the amount can be reliably estimated and other IAS 37 requirements are met, the outflow is probable for the provision test.
Common mistake
Recognising a provision for a probable future operating loss when no present obligation exists, or confusing probable disclosure of a contingent asset with its recognition.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |