Ensuring that provisions and contingencies are appropriately recognised or disclosed has never been more important. At the time of writing, the UK is beginning to ease out of the third national lockdown, and disruption and uncertainty continue to face many businesses up and down the country – particularly for certain sectors, such as hospitality and retail. Entities may need to recognise new provisions as a result of Covid-19 or increase their existing provisions.

Correctly distinguishing between a provision and a contingency is crucially important. A provision must be reflected within the financial statements, whereas a contingency is disclosed if material.