provisions

[Josvill2010]

Hi,

Should we book a provision or just disclose the liability in our books?

Based on old contract we billed the customer
The old contract had a 'clause' where we could bill more
Management has agreed that the clients deserves a CN
Amended contract has not been signed

Some people are against creating a provision untill the contract has been signed


An entity must recognise a provision if, and only if: [IAS 37.14]

• a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event),
• payment is probable ('more likely than not'), and
• the amount can be estimated reliably.

Does that fact that the ammended contract has not been signed enough reason not to book the provision?

 

[Paddy199]

When you say management has decided, is this minuted?

To be prudent, you should book. Is it material? Is it an audit? If neither, I wouldn't book.

 

[Josvill2010]

I have documented in emails only. The client has not signed the new contract, that's what another faction of the company is arguing why we shouldnt book it

It is Material