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AS 29 Meaning of Provision

Accountancy

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.

Rahul Sharma

CA Inter

★ 3K+

23-Feb-20 02:18

657

Answers (1)

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.