Question

difine the provisions and features​

Answer 1

Answer:

A provision is an amount that you put in aside in your accounts to cover a future liability.

The purpose of a provision is to make a current year’s balance more accurate, as there may be costs which could, to some extent, be accounted for in either the current or previous financial year. These costs that distinctly belong to a specific year could be misleading if accounted for in the future.

A provision is not a form of saving, even though it is an amount that is put aside for a future plausible cost or obligation. Provisions resulting impact is a reduction in the company's equity.

When accounting, provisions are recognized on the balance sheet and then expensed on the income statement.

Important Features of Provision Under IFRS

Here are important features of provisions explained in the IAS 37:

For all estimated-liabilities that are included within the definition of provisions, the amount to be recorded and presented on the statement of financial position should be the best estimate, at the statement of financial position date, of the amount of expenditure that will be required to settle the obligation. This is often referred to as the “expected value” of the obligation, which may be defined operationally as the amount the entity would pay, currently, either to settle the actual obligation or to provide consideration to a third party to assume it (e.g., as a single-occurrence insurance premium).