IAS 37Chapter 3Lesson 1
Recognising a provision: the three conditions
Step 1 of 9Learning objectives
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A provision is recognised only if three conditions are met at the same time: a present obligation arising from a past event, a probable outflow of resources (more likely than not) and a reliable estimate of the amount. For a number of similar obligations, probability is assessed for the class as a whole. Being unable to estimate is extremely rare: it then leads to disclosure of a contingent liability.
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Learning objectives
- Identify the three cumulative conditions for recognising a provision.
- Determine whether an outflow of resources is probable, including for a class of similar obligations assessed as a whole.
- Record the recognition of a provision when the three conditions are met.
- Assess the extremely rare case where no reliable estimate can be made and draw the consequence.