IAS 37Chapter 2Lesson 1
The vocabulary of IAS 37: provision, obligation, contingencies
Step 1 of 7Learning objectives
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A provision is a liability of uncertain timing or amount; a liability requires a present obligation arising from a past event. The obligation may be legal (contract, legislation) or constructive (practices, published policies, specific statements). A contingent liability is an obligation that is only possible or a present obligation that does not meet the recognition conditions; a contingent asset is an asset that is only possible. Finally, uncertainty is what distinguishes a provision from a trade payable and from an accrual.
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Learning objectives
- Identify the elements of the IAS 37 definitions: provision, liability, obligating event, legal and constructive obligation, contingent liability and asset, onerous contract, restructuring.
- Distinguish a provision from a trade payable and from an accrual according to the degree of uncertainty.
- Distinguish a provision from a contingent liability (possible obligation, or present obligation not meeting the criteria).