Provision Contingent Liabilities

Provision is a liability of uncertain timing or Contingent liabilities are possible obligations

amount. The liability may be a legal whose existence will be confirmed by
obligation or a constructive obligation uncertain future events that are not wholly
within the control of the entity.
Examples of provisions may include warranty An example is litigation against the entity
obligations; legal or constructive obligations when it is uncertain whether the entity has
to clean up contaminated land or restore committed an act of wrongdoing and when it
facilities; and obligations caused by a is not probable that settlement will be needed.
retailer’s policy to make refunds to customers.
A provision is measured at the amount that Contingent liabilities do not include
the entity would rationally pay to settle the provisions for which it is certain that the
obligation at the end of the reporting period or entity has a present obligation that is more
to transfer it to a third party at that time. likely than not to lead to an outflow of cash or
other economic resources, even though the
amount or timing is uncertain.
An entity recognizes a provision if it is A contingent liability is not recognized in the
probable that an outflow of cash or other statement of financial position. However,
economic resources will be required to settle unless the possibility of an outflow of
the provision. If an outflow is not probable, economic resources is remote, a contingent
the item is treated as a contingent liability. liability is disclosed in the notes.
NURLIYANA HAZWANI BINTI RAHIM

246458

GROUP: H