Reimbursement of a provision
Under IAS 37, recognise reimbursement as a separate asset only when receipt is virtually certain if the entity settles the obligation. The recognised amount must not exceed the provision. The expense relating to the provision may be presented net of the reimbursement in profit or loss, but the provision itself remains recognised unless the entity is not responsible for the relevant obligation.
Worked example
An entity recognises a $100,000 cleanup provision and has a virtually certain insurance recovery of $70,000. It recognises the $100,000 provision and a separate $70,000 reimbursement asset, subject to IAS 37 requirements.
Common mistake
Netting the provision down to $30,000 in the statement of financial position or recognising a reimbursement merely because receipt is probable.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |