Provisions are reserves that are “provisioned” by the financial institution to cover the potential loss on a loan. See also: provision_amount

FRS 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” (Provisions and Contingencies):

“A provision is recognised only when a past event has created a present obligation at the reporting date, an outflow of economic benefits is probable and the amount of the obligation can be estimated reliably. An obligation arises when an entity has no realistic alternative to settle the obligation and can be a contractual, legal or constructive obligation. This excludes obligations that will arise from future actions, even if they are contractual, no matter how likely they are to occur.”

“Provisions are measured at the best estimate of the amount required to settle the obligation at the reporting date and should take into account the time value of money if it is material.”


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