11. Provisions, employee benefits, contingent liabilities and contingent assets

Question 1

11. What is one thing provisions have in common?

Answer 1

they are based on estimates of future cash flows and, therefore, their measurement and recognition are subject to significant professional judgement.

Question 2

11. What are the three conditions a provision must meet to be recognised?

Answer 2

(a) an entity has a present obligation (legal or constructive) as a result of a past event;
(b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
(c) a reliable estimate can be made of the amount of the obligation.