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Chapter 10

2.4 Measurement

Provisions should be measured at the best estimate of the expenditure required to
settle the obligation as at the reporting date.

The best estimate of a provision will be:

 for a single obligation: the most likely amount payable

 for a large population of items: the expected value.

If the effect of the time value of money is material, then the provision should be
discounted to present value.

Illustrations and further practice

Now try TYU question 2 from Chapter 10.

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