FRS 12 has been superseded by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for accounting periods beginning on or after 1 January 2015. For more information visit:

• icaew.com/newukgaap

Synopsis

The objective of FRS 12 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets. Also to ensure that sufficient information is disclosed in the notes to the financial statements for users to understand their nature, timing and amount.

• A provision is a liability that is of uncertain timing or amount
• A contingent liability is either a possible obligation arising from past events or a present obligations arising from past events where it is not probable that will be a transfer of economic benefits
• A contingent asset is a possible asset arising from past events

FRS 12 requires that a provision is only recognised where:

• There is a legal or constructive present obligation as a result of a past event, and
• Payment is probable, and
• The amount can be reliably estimated.

The amount of the provision should be the best estimate of the amount required to settle the obligation at the reporting date.

Contingent liabilities are not recognised, but are disclosed unless the possibility of an outflow of economic resources is remote.

Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

• Read FRC Summary on FRS 12

Last updated 21 June 2015