ACCA考试F7财务报告讲义指导
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I. The accounting problem
Before IAS37 provisions were recognized on the basis of prudence, little guidance was given on when a provision should be recognized and how it should be measured. This gave rise to inconsistencies, and also allowed profits to be manipulated. Some problems are noted below:
(a) Provisions could be recognized on the basis of management intentions, rather than on any obligation to be entity;
(b) Several items could be combined into one large provision. There were known as ‘big bath’ provisions;
(c) A provision could be created for one purpose and then used for another;
(d) Poor disclosure made it difficult to assess the effect of provisions on reported profits. In particular, provisions could be created when profits were high and released when profits were low in order to smooth profits.
(1) Definitions
IAS 37 views a provision as a liability.
A provision is a liability of uncertainty timing or amount;
A liability is an obligation of an enterprise to transfer economic benefits as a result of past transactions or events.
Provision must be based on obligations, not management intentions.
(2) Under IAS37, a provision should be recognized: a. When an enterprise has a present obligation;
b. It is probable that a transfer of economic benefits will be required to settle it; c. A reliable estimate can be made of its amount; if a reasonable estimate cannot be made, then the nature of the provision and the uncertainties relating to the amount and timing of the cash flows should be disclosed.
A provision is made for something which will probably happen. It should be recognized when it is probable that a transfer of economic events will take place and when its amount can be estimated reliably.
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