Provisions

Question 1

What is a provision ?

Answer 1

It’s a liability with uncertainty on timing or amount BUT a reliable estimate can be made

Question 2

Common types of provisions

Answer 2

Obligations related to litigations 
Warranties 
Environmental damages 
Business restructuring 
Pension benefits

Question 3

Conditions of recognition of à provision:

Answer 3

1-it exists à présent obligation
2-obligation arising from past events
3-probable outflow of ressources
4-reliable estimate

Question 4

Defined benefit obligation: DBO

Answer 4

DBO= benefit attributed to each year worked
x nb of years worked
x Life expectancy of the employee
x probability that the employee will still be employed by the company at the retirement age
x dis out factor

Question 5

Contingent liabilities

Answer 5

Are not recognized in the in the financial statements because they are a POSSIBLE obligation for which it is NOT PROBABLE that a payment will be made or for which a RELIABLE estimate of the obligation cannot be made