Provision, Contingent Liabilities

Question 1

When should a provision be created

Answer 1

• A present obligation (legal or constructive) as a result of a past event exist
  -It is probable that an outflow of resources will be requited to settle the obligation
  -A reliable estimate can be made of the amount of the obligation

Question 2

Contingent Liability

Answer 2

-If it is possible that the expense will incur.