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Provision for reorganisation

PGMPGM Font Of All KnowledgeRegistered Posts: 1,954
in General accounting discussion
Does anyone know the current rules for creating a provision (for reorganisation)?

Its one of the things they keep tightening up on, obviously to try and stop the smoothing of profits as its a method of accruing costs.

So I wasn’t sure what the auditors will or won’t allow....

Thanks :)

Comments

  • Steve CollingsSteve Collings Experienced Mentor Registered Posts: 997
    Hi,

    Essentially if the provision meets the requirements in FRS 12 (IAS 37) then the auditors will allow it. Criteria to be met are:

    1. Legal (or constructive) obligation at the balance sheet date.
    2. Highly probable funds will be paid out to meet the legal or constructive obligation.
    3. You can reliably estimate the cost.

    Regards
    Steve
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    thanks, much appreciated.
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