BCOM, BBA, CPA AND ACCA, accounting students and Any Other Accounting Practitioners.
Understanding IAS 37-Provisions, Contingent Assets and Contingent Liabilities.
![](https://www.campustimesug.com/wp-content/uploads/2023/01/ias-37-lady-fetured.jpg)
Provision
A provision is a liability of uncertain timing and amount.
The objective of IAS 37 is to specify the accounting treatment for provisions- This accounting standard brings about consistence in the making of provisions in the financial statements.
We recognize a provision if a reliable estimate can be made.
![](https://www.campustimesug.com/wp-content/uploads/2023/01/IAS37Provision.png)
IAS 37 stipulates the recognition criteria in the financial statements for Provisions which is;
- There must be a present obligation as a result of past event and;
- It is probable that an outflow of economic benefits will be required to settle the obligation.
- A reliable estimate can be made.
![](https://www.campustimesug.com/wp-content/uploads/2023/01/Contingencies-Summary.jpg)
When such conditions exist, the entries in the financial statements will be as follows;
Dr Expense when provision is created
Cr Provision (Liability).
![](https://www.campustimesug.com/wp-content/uploads/2023/01/ias-37-featured-1.jpg)
Contigent Liabilities
These are not recognized in the Financial Statements hence no double entry is passed unless; there is information regarding the same then only disclosed in the notes to the financial statements.
Also read:https:https://www.campustimesug.com/?s=ifrs+5