IAS37 - Provisions, Contingent Liabilities and Contingent Assets

Question 1

What are the conditions that must be met in order to recognise a provision?

Answer 1

1. A present obligation as a result of a past event exists
2. It is probable an outflow of resource will be required to settle the obligation.
3. A reliable estimate can be made of the amount of the obligation

Question 2

Specific applications

Answer 2

Onerous contracts
- we would make a provision for the lower of completing the contract at a loss or the amount we would owe for breaching the contract.