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Rahul Sharma

Rahul Sharma

CA Final

3K+

23-Feb-20 02:18

40

AS 29 Meaning of Provision

In the annexed pictures, there is a meaning of Provision and a case study. In the given case study, amount is clearly provided and thus as per definition we didn't apply any substantial degree of estimation, then how come we are Calling it as a Provision? Pls explain.

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Answers (1)

Suraj Lakhotia

Suraj Lakhotia

Admin

24-Feb-20 06:13

Your understanding is correct. It would be a liability once the amount is ascertained. However, at times in cases of environmental damages etc, the amount incurred may be more than the original estimate. Hence could be called a provision as well.