A provision made in accounts is the recognition of an expense or
liability the timing or amount of which is uncertain. This follows
its accountancy meaning. Provisions are distinguished from trade
creditors and accruals and are reported separately in accounts. The
word is also often used to refer to the recognition of reduction in
value of an asset, for example, a bad debt provision or a stock
provision. The rules governing such ‘provisions’, both
in accountancy practice and tax law, are different, and covered
elsewhere in this guidance (stock valuation
BIM33100 onwards, bad debts
BIM42700 onwards).
A provision made in accounts will only be allowable for
tax purposes if:
