New UK GAAP 2015: Application of FRS 100-102 in the UK

Chapter 17 Provisions and contingencies

1 Introduction

2 Key differences to IFRS / previous UK GAAP

   2.1 Key differences to previous UK GAAP

       2.1.1 Scope – Provisions, contingent liabilities and contingent assets covered by another section

       2.1.2 Scope – Financial guarantee contracts

       2.1.3 Recognition of provisions for future operating losses

       2.1.4 Disclosures

   2.2 Key differences compared to IFRS

       2.2.1 Scope – Provisions, contingent liabilities and contingent assets covered by another section

       2.2.2 Scope – Financial guarantee contracts

       2.2.3 Disclosures

3 Requirements of Section 21 for provisions and contingencies

   3.1 Terms used in Section 21 of FRS 102

   3.2 Scope

       3.2.1 Items outside the scope of Section 21

1. 3.2.1.A Executory contracts, except where the contract is onerous
2. 3.2.1.B Financial instruments
3. 3.2.1.C Insurance contracts
4. 3.2.1.D Areas covered by other sections of FRS 102

   3.3 Determining when a provision should be recognised

       3.3.1 The entity has an obligation at the reporting date as a result of a past event

       3.3.2 A transfer of economic benefits is probable

       3.3.3 The amount of the obligation can be measured reliably

       3.3.4 Cases where recognition of a provision is prohibited

1. 3.3.4.A Future operating losses
2. 3.3.4.B Staff training costs

       3.3.5 Examples of provisions in Section 21

1. 3.3.5.A Onerous contracts
2. 3.3.5.B Restructuring provisions
3. 3.3.5.C Warranty provisions