Can a company hold a "provision","just in case" of an emergency?
A) No. "Just in case" is not a good enough reason
B) Yes. In fact provisions are an essential part of "prudence"
C) No. Provisions can never be held
D) Yes. Companies have an obligation to build provisions for all sorts of scenarios

Question

Quizplus · Accepted Answer

IAS 37 has guidelines for Provisions. There must be "probable cause". For example, building a provision to cover the basic maintenance cost of an aircraft engine, when it is known that the event will occur and the expected cost is known. Although it seems "prudent" to build provisions for "just in case" events, it is not allowed - one reason being that building the provision will reduce profit.

Can a Company Hold a "Provision","just in Case" of an Emergency