Provision for lawsuit

Dear Mike,

I have hard time understanding following extract from IAS 37:

“In rare cases, for example in a lawsuit, it may not be clear whether an entity has a present obligation. In those cases, a past event is deemed to give rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists at the balance sheet date. A provision should be recognised for that present obligation if the other recognition criteria described above are met. If it is more likely than not that no present obligation exists, the entity should disclose a contingent liability, unless the possibility of an outflow of resources is remote. [IAS 37.15]”

-my question is, should company recognise provision for lawsuit if lawyers think that company will loose lawsuit in future?

best regards

Petar