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  • Learning Objectives 16.3:: Provisions & Contingent Liabilities

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    Phạm Hải Mỵ
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    1) Provisions are liabilities of uncertain timing or amount that arise from past events, where an outflow of resources is probable to settle the obligation and a reliable estimate can be made. 2) Provisions are recognized by debiting an expense account and crediting a provisions account. In subsequent years, provisions may be adjusted by debiting or crediting the provisions account along with a corresponding expense or income. 3) Contingent liabilities are possible obligations from past events that are subject to uncertain future events outside the entity's control. They are not recognized as liabilities.

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    1) Provisions are liabilities of uncertain timing or amount that arise from past events, where an outflow of resources is probable to settle the obligation and a reliable estimate can be made. 2) Provisions are recognized by debiting an expense account and crediting a provisions account. In subsequent years, provisions may be adjusted by debiting or crediting the provisions account along with a corresponding expense or income. 3) Contingent liabilities are possible obligations from past events that are subject to uncertain future events outside the entity's control. They are not recognized as liabilities.

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    17 views9 pages

    Learning Objectives 16.3:: Provisions & Contingent Liabilities

    Uploaded by

    Phạm Hải Mỵ
    1) Provisions are liabilities of uncertain timing or amount that arise from past events, where an outflow of resources is probable to settle the obligation and a reliable estimate can be made. 2) Provisions are recognized by debiting an expense account and crediting a provisions account. In subsequent years, provisions may be adjusted by debiting or crediting the provisions account along with a corresponding expense or income. 3) Contingent liabilities are possible obligations from past events that are subject to uncertain future events outside the entity's control. They are not recognized as liabilities.

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    of 9

    Learning 

    objectives 16.3:
    Provisions & Contingent
    liabilities
    P R O VI SIO N What is
    provisions?
    Losses
    Warranty
    Pension
    Indemnity
    S
    Provisions are
    defined as I AS 37/ AA S B137
    liabilities of
    uncertain timing or
    amount.
    When a
    prosision is
    recognised:
    A provision is regconised when an
    entity has a present obligation (legal or
    constructive) as a result of a past event
    PROVISION that will probably result in an outflow
    S of economic benefits, and a reliable
    estimate can be made of the amount of
    the obligation.
    How we recognize provisions?
    • When arising a payable provisions, the accountan shall record:
    DEBIT Expenses (Chi phí liên quan)
    CREDIT Provisions (Dự phòng phải trả)
    • In the following years, the company may have to re-evaluate the provision debt. If
    the enterprise assesses that the reserve debt is lower than the previous provision,
    the accountant shall record the adjustment of decrease in provision:
    DEBIT Provisions (Dự phòng phải trả)
    CREDIT Expenses (Chi phí liên quan)
    • In case of an increase in the provision, the following entry is recorded:
    DEBIT Expenses (Chi phí liên quan)
    CREDIT Provisions (Dự phòng phải trả)
    Repairs and mainternance expense was
    debit on the grounds that it recorded the
    FU T U R E expense in the period that the economic

    C O ST S benefits of the plant and equipment were


    used. The provision for the future repairs
    and mainternance on plant and equipment
    does not satisfy the definition of liability,
    as there is no present obligation to an
    external party at the end of the reporting
    period.
    L I A B IL I T I E S
    CONTINGEN What is
    Contingent
    liabilities ? 
    A product waranty
    Compension for losing the case
    Outstanding Lawsuit
    A contingent liabilities is defined in the standard
    as a possible obligation arising from a past event
    that will be confirmed only by the occurrence or
    non-occurrence  of one or more uncertain future
    events that are not wholly within the control  of
    the entity
    DECISION

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