IAS 37Chapter 7Lesson 1
After recognition: remeasure, unwind, use, reverse
Step 1 of 7Learning objectives
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A provision is not fixed. At each reporting date, it is reviewed and adjusted to reflect the current best estimate, and reversed if an outflow of resources is no longer probable. When it is discounted, it increases each period to reflect the passage of time, and this increase is a borrowing cost. Finally, a provision is used only for the expenditures for which it was originally recognised: charging other expenditures against it would conceal two different events.
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Learning objectives
- Explain the review of provisions at each reporting date and their reversal when the outflow is no longer probable.
- Calculate the unwinding of the discount for the period and the movement in a provision (additions, uses, reversals).
- Record the use, reversal and unwinding of the discount (borrowing cost) of a provision.
- Identify the prohibition on charging against a provision expenditures unrelated to its original purpose.