Provisions and Contingencies: Considerations regarding recognition and measurement

Dicu Roxana Manuela () and Mardiros Daniela Neonila ()
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Dicu Roxana Manuela: “Alexandru Ioan Cuza” University of Iasi
Mardiros Daniela Neonila: “Alexandru Ioan Cuza” University of Iasi

Ovidius University Annals, Economic Sciences Series, 2015, vol. XV, issue 1, 733-737

Abstract: Obligations are an important part of an entity?s life, because, basically, they are the „source? for both assets and financing. Their existence imposes a settlement in the future, because there are no realistic alternatives. Sometimes, the obligating events cannot be evaluated fairly, so the entity must estimate the effort to settle. Recording provisions, contingent assets and liabilities in accounting is a part of the prudent attitude of an entity. Thus, when given a choice between several outcomes where the probabilities of occurrence are equally likely, an entity should recognize those obligations, evaluated or estimated, resulting in the lower amount of profit. Recognizing a provision reflects a sign of a possible outcome of economic resources in the future, without knowing the value, but being able to estimate it reliably. This paper brings into attention some aspects which impose the recognition and measurement of estimated obligating events.

Keywords: provision; contingent assets and liabilities; performance; prudence (search for similar items in EconPapers)
JEL-codes: H30 M40 M48 (search for similar items in EconPapers)
Date: 2015
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