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In order that a provision should be recognized in an entity's financial statements, it is necessary that:

1. The entity has a present obligation2. The entity has a legally enforceable obligation3. The entity has a constructive obligation4. It is possible that an outflow of economic benefits will be required

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Question added by Deleted user
Date Posted: 2013/08/28
Farhan uddin Khilji
by Farhan uddin Khilji , Head of Internal Audit , ABV Rock Group Co. Ltd.

The entity has a present obligationan for which outflow of economic benefits will be required.

Deleted user
by Deleted user

  • Provision is  a liability of uncertain timing or amount. An entity must recognize a provision if, and only if:  * a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event), * payment is probable ('more likely than not'), and * the amount can be estimated reliably.
a possible obligation depending on whether some uncertain future event occurs, or a possible obligation depending on whether some uncertain future event occurs, or

Prince Ninan
by Prince Ninan , Audit Executive , Lewis & Pecker

 The entity has a present obligation