Provisions and Contingencies: Considerations regarding recognition and measurement.

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. [ABSTRACT FROM AUTHOR]

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