Recognition of reserves in financial reporting under IFRS

In connection with the introduction of IFRS in the legal sphere of Russia, many organizations have questions about the necessity of application of IFRS in practice and the mechanisms of implementation and reporting according to international standards. According to IAS 37 "Provisions, contingent liabilities and contingent assets" provision is a liability of uncertain timing or amount. IAS 37 establishes the following criteria for the provision recognised in financial statements: 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'); the amount can be estimated reliably. The amount recognised as a provision should reflect the best estimate of the expenditure required to the end of the reporting period to settle the present obligation. In accordance with IFRS and established practice, it is possible to identify two basic methods of calculating reserves: full reservation and expected values. Estimating of provision must include the time value of money if the time factor is significant. The main ideas of the paper are confirmed by some real examples.

Keywords

Authors

References