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Provisions and Contingencies: Considerations regarding recognition and measurement

Author

Listed:
  • Dicu Roxana Manuela

    (“Alexandru Ioan Cuza” University of Iasi)

  • Mardiros Daniela Neonila

    (“Alexandru Ioan Cuza” University of Iasi)

Abstract

Obligations are an important part of an entity?s life, because, basically, they are the „source? for both assets and financing. Their existence imposes a settlement in the future, because there are no realistic alternatives. Sometimes, the obligating events cannot be evaluated fairly, so the entity must estimate the effort to settle. Recording provisions, contingent assets and liabilities in accounting is a part of the prudent attitude of an entity. Thus, when given a choice between several outcomes where the probabilities of occurrence are equally likely, an entity should recognize those obligations, evaluated or estimated, resulting in the lower amount of profit. Recognizing a provision reflects a sign of a possible outcome of economic resources in the future, without knowing the value, but being able to estimate it reliably. This paper brings into attention some aspects which impose the recognition and measurement of estimated obligating events.

Suggested Citation

  • Dicu Roxana Manuela & Mardiros Daniela Neonila, 2015. "Provisions and Contingencies: Considerations regarding recognition and measurement," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 733-737, May.
    • Handle: RePEc:ovi:oviste:v:xv:y:2015:i:1:p:733-737
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    More about this item

    Keywords

    provision; contingent assets and liabilities; performance; prudence;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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