Page 204 - F2 Integrated Workbook STUDENT 2019

Chapter 8

Recognition

2.1 Recognition of uncertain liabilities

A provision is required to recognise an uncertain liability.

As per IAS 37 Provisions, contingent liabilities and contingent assets, to recognise a
provision:

 a present obligation (legal or constructive) as a result of a past event exists

 a PROBABLE outflow of economic benefit will occur

 a reliable estimate can be made of the amount of the obligation.

If all above conditions are met, post the following journal:

Dr P/L

Cr Provision

N.B. Only the movement in the provision is posted in any accounting period.

196