A provision should be recognized when _______________.
A provision should be recognized when _______________.
The correct option is D All of the above
Definition
A provision can be a liability of uncertain timing or amount. A
liability, in turn, is a present obligation of the entity arising from past
events, the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits.
Though it is often thought to be, a provision should not be
considered to be a form of savings. Examples are; income tax liability, product
warranty, environment restoration,etc.
Recognition
A provision shall be recognized if the following criteria are
fulfilled:
1. an entity has a
present obligation as a result of a past event;
2. it is probable that an
outflow of resources embodying economic benefits will be required to settle the
obligation;
3. a reliable estimate
can be made of the amount of the obligation.
4. a specific current
statement, the entity will accept certain responsibilities and other
parties have valid expectations that the entity will discharge its
responsibilities.
No provision, however, is recognized for costs that need to be
incurred to operate in the future. Also, an obligation always involves another
party to whom the obligation is owed (even if this party is unknown).
Definition
A provision can be a liability of uncertain timing or amount. A liability, in turn, is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Though it is often thought to be, a provision should not be considered to be a form of savings. Examples are; income tax liability, product warranty, environment restoration,etc.
Recognition
A provision shall be recognized if the following criteria are fulfilled:
1. an entity has a present obligation as a result of a past event;
2. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
3. a reliable estimate can be made of the amount of the obligation.
4. a specific current statement, the entity will accept certain responsibilities and other parties have valid expectations that the entity will discharge its responsibilities.
No provision, however, is recognized for costs that need to be incurred to operate in the future. Also, an obligation always involves another party to whom the obligation is owed (even if this party is unknown).
