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Provisions

A provision is a liability of uncertain timing or amount, recognised when a present obligation from a past event, probable outflow and reliable estimate exist. Estimate the amount needed to settle the obligation at the reporting date using the available evidence. A warranty provision, for example, arises from sales already made and anticipated claims. Review the estimate at each reporting date and adjust it when circumstances change.

Worked example

A warranty obligation estimated at 500 is recognised as a provision.

Common mistake

A general intention to incur future costs is not a present obligation; contingent liabilities follow different rules.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA FA Direct September 2026–June 2027
ACCA FR Direct Official assessment-window verification pending
ACCA K1 Direct July 2027–August 2028
ACCA SBR Direct Official assessment-window verification pending
CIMA BA3 Direct Official assessment-window verification pending
CIMA F2 Direct Official assessment-window verification pending
FIA FFA Direct September 2026–June 2027

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