A provision should be recognised when:

  • An enterprise has a present obligation as a result of a past event;
  • It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

A reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision should be recognised.

AS-29 Provisions, Contingent Liabilities, and Contingent Assets
Present Obligation

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