Accounting Standards
Provisions and Contingent Liabilities Explained: When IAS 37 and FRS 102 Say You Must Book a Legal Claim
When a lawsuit, warranty claim, or dispute is still unresolved at year-end, should it appear in the accounts? IAS 37 and FRS 102 both apply a strict three-question test — present obligation, probable outflow, reliable estimate — to decide between a provision, a disclosure note, or nothing at all. This article walks through a worked unfair dismissal claim, showing exactly how a solicitor's probability assessment becomes a defensible £27,000 provision figure, plus the tax and audit pitfalls SME owners commonly miss.