This term usually relates to a long term liability of a reporting entity.
A provision is a best estimate of a future obligation owed by a reporting entity as a result of a commitment that it has made to a course of action where the precise sum owing is of uncertain timing or amount on its accounting reference date.
Provisions are one of the areas where the inherent uncertainty in accounts or financial statements becomes readily apparent and the exercise of judgement is required.
See also contingent liabilities.
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