Provision
Accounting glossary · Understand, connect, apply
Under IAS 37, a provision is a liability whose amount or settlement timing is uncertain. Recognition requires a present obligation from a past event, probable outflow and a reliable estimate.
Example
A retailer has a warranty obligation from products already sold. Expected repair costs can be estimated reliably, so a provision can reflect the obligation before claims are paid.
Remember the difference
A provision is a recognised liability. Some uncertain obligations are disclosed as contingent liabilities instead, depending on the recognition and disclosure criteria.
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Published 9 November 2026. Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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