Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, which of the following conditions is NOT required to recognize a provision?

Answer options:

There is a present obligation as a result of a past event

It is probable that an outflow of resources will be required to settle the obligation

A reliable estimate can be made of the amount of the obligation

The amount of the obligation must be known with absolute certainty

How to approach this question

Recall the definition of a provision. It is a liability of uncertain timing or amount.

Full Answer

D.The amount of the obligation must be known with absolute certainty✓ Correct

A provision is a liability of uncertain timing or amount. IAS 37 requires a present obligation, a probable outflow of resources, and a reliable estimate. Absolute certainty is not required.

Common mistakes

Confusing provisions with accruals (which have a much higher degree of certainty).

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Practice the full ACCA FA — Financial Accounting Practice Exam 2

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