Despite calling for improvements to the standard of reporting provisions, particularly the lack of disclosure of the uncertainties about the amount or timing of cash outflows, or the financial effect of contingent liabilities, the quality of reporting is still sub standard, according to the regulator. 

The FRC review stated: ‘We are aware from our routine reviews that provision balances are, on occasion, misclassified in the statement of financial position. This can lead to the omission of key disclosures required by IAS 37, including information about the associated uncertainties in the timing and amount of probable outflows.’

Provisions and contingent liabilities reporting is of particular importance to investors owing to the forward-looking information it can provide about a company’s exposures. The issues giving rise to provisions and contingent liabilities are often long-term in nature, such as climate change and other environmental obligations, or significant to the assessment of future business performance, for example, onerous contracts and regulatory penalties or compensation.