Provisions for liabilities
Real life example:
Solution should a provision be recognised and in what amount ...?
All courses
Back 24iValue system
Next - a claim was filed with court against ABC
- the claim amounts to GBP 5 million
- the chances to win the case is estimated at 1/3 and the chances to lose and pay the claim as 2/3
Solution should a provision be recognised and in what amount ...?
- when the provision is related to a single case, two solutions are possible => ABC will not incur the cost at all or will pay GBP 5 million
- we estimate the probability of the obligation in the future => the provision amount should reflect the most probable outcome
- here it is more probable that the case will be lost and therefore a provision of GBP 5 million should be established
- at best the probability should be estimated by a lawyer.
