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Provisions, Contingent Liabilities and Reimbursements

Provisions and Contingent Liabilities

Where, as a result of past events, there may be an outflow of resources embodying futureeconomic benefits in settlement of: (a) a present obligation the one whose existence atthe Balance Sheet date is considered probable; or (b) a possible obligation the existenceof which at the Balance Sheet date is considered not probable.

There is a presentobligation that probablyrequires an outflow ofresources and a reliableestimate can be made of theamount of obligation

There is a possibleobligation or a presentobligation that may, butprobably will not, require anoutflow of resources.

There is a possibleobligation or a presentobligation where thelikelihood of an outflow ofresources is remote.

A provision is recognized(paragraph 14).

Disclosures are required forthe provision (paragraphs 66and 67).

No provision is recognized(paragraph 26).

Disclosures are required forthe contingent liability(paragraph 68).

No provision is recognized(paragraph 26).

No disclosure is required(paragraph 68).

There may be circumstances where the enterprise has a right to recover some or whole of the

liability from a third party, i.e. , a third party will reimburse the expense incurred by the

enterprise.

Such reimbursement will be treated as under:

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Reimbursements

Some or all of the expenditure required to settle a provision is expected to be reimbursedby another party

The enterprise has noobligation for the part of theexpenditure to bereimbursed by the otherparty

The obligation for theamount to be reimbursedremains with the enterpriseand it is virtually certainthat reimbursement will bereceived if the enterprisesettles the provision.

The obligation for theamount to be reimbursedremains with the enterpriseand the reimbursement isnot virtually certain if theenterprise settles theprovision.

The enterprise has no liabilityfor the amount to bereimbursed (paragraph 50).

No disclosure is required.

The reimbursement isrecognized as a separateasset in the Balance Sheet

and may be offset in thestatement of profit and loss.The amount recognized forthe expected reimbursementdoes not exceed the liability(paragraphs 46 and 47)

The reimbursement isdisclosed together with theamount recognized for thereimbursement (paragraph 67(c)).

The expected reimbursementis not recognized as an asset(paragraph 46).

The expected reimbursement isdisclosed (paragraph 67(c)).