Recognition Criteria for Provision as per IAS 37

The standard of IAS 37: Provisions, Contingent Liabilities and Contingent Assets, sets three Criteria for Recognizing a provision:

1. There must be a present obligation as a result of past event.

2. The outflow of economic benefits to satisfy the obligation must be probable (That is more than 50%)

3. The amount of economic benefits required to satisfy the obligation must be reliably estimated.

# Journal Entries:

When Recognized:

Expense A/C................Dr.

    Provision A/C................Cr.

When Benefit Outflow:

Provision A/C......................Dr.

    

      Bank/Cash A/C.....................Cr.