According to IAS 37 (provisions,contingent liabilities and contingent assets)for a provision to be recognized there must be:
A) A proven outflow of economic resources which has been independently valued
B) A probable outflow of economic resources which has been independently valued
C) A probable outflow of economic resources of which a reliable estimate can be made
D) A definite outflow of economic resources of which an accurate valuation can be made

Question

Quizplus · Accepted Answer

According to IAS 37, for a provision to be recognized, there must be a probable outflow of economic resources, and a reliable estimate can be made of the amount of the obligation. This means that while there is some uncertainty around the amount and timing of the outflow, it is more likely than not to occur, and a reasonable estimate of its cost can be made. Option A requires a proven outflow, which is a higher standard of certainty than probable. Option B is correct in requiring a probable outflow, but does not mention the need for a reliable estimate. Option D requires a definite outflow and an accurate valuation, which are too high a standard of certainty for recognizing a provision.

According to IAS 37 (Provisions,contingent Liabilities and Contingent Assets)for a Provision