I. Provision
A provision is a liability of uncertain timing or amount.
Uncertainty is what distinguishes a provision from another type of liability ( such as a trade payable or an accrued expense).
If a business has a trade payable or a bank overdraft, its management know that there is a liability. Management also knows the amount that the business will have to pay and when it will fall due.
Sometimes the position is less clear. For example, suppose a business sells faulty goods to a customer and the customer makes a claim for damages. The case will not be heard for several months and it is probable but not certain that the business will be liable. In addition, the actual amount payable depends on negotiations between the lawyers.
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Download: Chapter 6 Provisions and Liabilities