Provision (accounting)

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In financial accounting, the provisions of are accounts that record the current obligations of an entity. The recording of liabilities in the balance sheet of an entity is matched against the appropriate expense account in the income statement of the entity.

Sometimes in IFRS, but not in GAAP, term reserves are used instead of terms. Such use, however, is inconsistent with the terminology suggested by the International Accounting Standards Board. The term "reserve" can be a confusing accounting term. In accounting, the reserve is always an account with a credit balance in the Equity of the entity on the Balance Sheet, while for the non-professional it has a cash pool connotation set aside to meet future obligations (debit balances).

Video Provision (accounting)

Under International Financial Reporting Standards

In the International Financial Reporting Standards (IFRS), provisioning treatment (as well as contingent assets and liabilities) is found in IAS 37.

Definition

A provision can be either an account of time or an uncertain amount. The obligation, in turn, is the present obligation of the entity arising from past events, the settlement expected to generate an outflow of the resource entity that embodies the economic benefits.

Although often considered, the provision should not be considered a form of savings.

Recognition

Conditions must be recognized if the following criteria are met:

• the entity has a current obligation as a result of past events;
• it is likely that an outflow of resources that embodies economic benefits will be required to settle the obligation;
• Reliable estimates can be made with the number of liabilities.
• the current statement, the entity will accept certain responsibilities and the other party has a valid expectation that the entity will carry out its responsibilities.

No provision, however, is recognized for the costs incurred for future operations. Also, the obligation always involves the other party to whom the obligation is owed (even if this party is unknown).

Contract executor and weight

An executing contract is defined as a contract in which both parties are not performing their obligations (eg sending objects and paying for the object) or both parties have partially done their obligations at the same level. In the case of an execution contract, IAS 37 does not apply and both assets and liabilities are recorded. However, the provision should be recognized if the execution contract becomes burdensome to the entity. The aggravating contract is defined as a contract in which the unavoidable costs resulting from an entity fulfilling its contractual obligations exceed the economic benefits expected to be received under that contract.

Restructuring

Restructuring is defined as a program that is planned and controlled by management, and materially changes either the business scope of an entity, or the manner in which it is carried out. If the restructuring is anticipated, it leads to the recognition of the terms. However, the provision is subject to some special limitations: The restructuring terms do not include fees such as ongoing retraining or relocation of staff, marketing, or investments in new systems and distribution networks. This is because these expenses are related to the future behavior of the business and thus are not an obligation for restructuring to be recognized at the end of the reporting period. the purpose of the provision is for all costs and losses even when the amount is

Maps Provision (accounting)

Terms for income tax (United States GAAP)

In American English, the word terms is used as a synonym for "cost", especially when it appears in phrases referring to the income tax expense incurred by a business during the income statement period. In the income statement, the occurrence of the terms for income tax will refer to that fee.

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See also

• Balance Sheet
• Statement of earnings
• International Financial Reporting Standards
• IAS 37

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References

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External links

• IAS B: IAS 37 - Provisions, Contingency Liabilities and Contingent Assets

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