Provisions and contigent liabilities

A provision shall be recognised when:

  1. an entity has a present obligation (legal or constructive) 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; and
  3. a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, no provision shall be recognised.

An entity shall not recognise a contingent liability.

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Where, as a result of past events, there may be an outflow of resources embodying future economic benefits in settlement of: (a) a present obligation; or (b) a possible obligation whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
There is a present obligation that probably requires an  outflow of resources.There is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.There is a possible obligation or a present obligation where the likelihood of an outflow of resources is remote.
A provision is recognised (paragraph 14)No provision is recognised (paragraph 27)No provision is recognised (paragraph 27).
Disclosures are required for the provision (paragraphs 84 and 85).Disclosures are required for the contingent liability (paragraph 86).No disclosure is required (paragraph 86).

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