Period till when provision can be carried forward

This query is : Resolved

Minakshi (Querist)
Follow

19 January 2011 Hello All,

One of our UK client made provision for various expenses. Invoices \ supporting documents for evidence purpose are not available. It means there is no base on which provisions are made.

Every year end they make such provisions and carry forward part of that amount with current years provision.

My questions -
1. Is there any time limit till what one can carry forward past years' provision ?
2. How the provisions should be made?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

19 January 2011 Provisions cannot be carried forward indefinitely. Provisions should be made on those expenses based on reasonable certainty and should be squared up on time basis depending upon the nature of expenses.

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
Follow

19 January 2011 provision should be supported by the proper reasons i.e. there shoudl have resonable cetaintly to create a provision. there is no guidance that till what period you can carry forward the provision as it varies case by case.

so even if after 5 years you realised that there is need of a particular provision then you can continue the same if htere is reasonable certainty.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok