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9.3 Measurement of provisions
Publication date: 30 Nov 2022
us IFRS & US GAAP guide
In certain circumstances, the measurement objective of provisions varies under the two frameworks.
IFRS results in a higher liability being recorded when there is a range of possible outcomes with equal probability.
US GAAP
| IFRS
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A single standard does not exist to determine the measurement of obligations. Instead, entities must refer to guidance established for specific obligations (e.g., environmental or restructuring) to determine the appropriate measurement methodology.
| The amount recognized should be the best estimate of the expenditure required (the amount an entity would rationally pay to settle or transfer to a third party the obligation at the balance sheet date).
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Pronouncements related to provisions do not necessarily have settlement price or even fair value as an objective in the measurement of liabilities, and the guidance often describes an accumulation of the entity’s cost estimates.
When no amount within a range is a better estimate than any other amount, the low end of the range is accrued.
| Where there is a continuous range of possible outcomes and each point in that range is as likely as any other, the midpoint of the range is used.
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