Meaning under IAS 37
A provision is an obligation whose timing or amount is uncertain. IAS 37 addresses legal and constructive obligations, and the recognition and measurement rules for such obligations. Source: **curr-stat-ias37**, About, Provisions. Uncertainty does not mean that every future expenditure is already an obligation.
Warranty repairs for products already sold may require an estimate of future settlement. A provision in the accounts is not the same as money set aside in a separate account. The organization must arrange liquidity separately for the actual payments.
Distinctions and review
Do not confuse a provision with an adjustment to the carrying amount of trade receivables or with a contingent liability. The everyday word “reserve” can conceal different objects. When reading the accounts, identify the basis, the movement in the amount and whether a change relates to a new event, use of the provision or a revision of the estimate. Related reading: [financial statements roadmap](/guides/financial-statements-roadmap/) and [balance sheet](/guides/balance-sheet/).