Provisions and Contingencies

Provisions and contingencies are accounting terms related to uncertain future liabilities. Provisions are estimated expenses set aside in the current financial statements for obligations that are likely to occur, such as warranty costs or legal claims, based on the best available information. Contingencies, on the other hand, are potential liabilities or gains that depend on future events, which may or may not happen, like lawsuits or tax disputes. While provisions are recognized in the accounts when probable and estimable, contingencies are disclosed in notes unless their occurrence is remote. Both help ensure accurate financial reporting by acknowledging possible future risks.