National Recognition of provisions and accruals under National Accounting Standard No. 6 (hereinafter referred to as CRS No. 6), is how you can read Under point 1.1. of this document: ‘Determining uniform rules for the entry into the accounts of reserves, passive accruals and contingent liabilities, as well as their valuation and presentation and disclosure criteria in financial statements’[1].
In accordance with the above point, the disclosure of the provisions, passive accruals of costs and contingent liabilities ‘allow users of financial statements to have a proper understanding of their nature, deadlines, amounts and changes thereof, and the correct determination of the amounts of liabilities including provisions requiring the outflow of assets, thereby contributing to a reliable and reliable mapping of the assets, financial and financial performance of the reporting entity’.[2]. Therefore, CRS No 6 is an explanation for Article 7(1)(5) and section 2, Article 6(1)(2) and Article 8(1) Accounting Act.
The condition for the provision to be recognised or the ancillary cost to be accounted for in the accounts is the occurrence of an event requiring an entity to carry out future benefits, at the same time it is reasonable and possible to reliably estimate the costs or losses that are necessary for the entity to perform its duties. As I speak Under point 3.2. CRS No 6, a reserve shall be created only if:
- „(a) on the unit the current obligation to provide (legal or customary)[3] resulting from past events,
- it is likely that compliance with the obligation will result in the use of already owned or future assets of the entity,
- a reliable estimate of the amount of performance of the obligation is possible.’[4]
At the same time, the above conditions also justify the recognition of passive accruals of costs.
The accounting books, in the form of reserves or a passive settlement of periodic costs, shall contain only the effects of the performance of the obligation arising from past events that exist independently of the entity's future activities or intentions. Reservoirs may not be created or accruals cannot be made for the costs of future activities.
point 3.4. CRS No 6 shows how the bookkeeping of the reserve / the outward settlement of the costs is recorded. After first, This is an increase in the cost of operating and passive accruals of costs (if it relates directly to the entity's operating activities).
After second, This is an increase in other operating costs and reserves, if indirectly related to the entity's operational activities. After third, This is an increase in financial costs and provisions, if any.
In the end, this is an increase in emergency losses and reserves, if this relates to events related to risks other than the general risk of operating. In the same way, the amount of reserve / passive accruals of costs shall be increased if the risk of the entity having the necessary to comply with its obligation to benefit is increased.
When a commitment to which the reserve was created arises, the reserve shall be used. The above is almost identical under Article 35d(1) The Accounting Act, according to which the obligation for which the reserve has previously been created is created, reduces the reserve.
point 3.7. CRS No 6 describe the solution to the part (or whole) of the unused reserve in the event of a reduction or risk justifying its creation. This is a reduction in reserve status and an increase in: 1. other operating revenue where the reserve is indirectly operating; 2.
financial revenue where the reserve relates to financial operations; 3. extraordinary gains where the reserve relates to events related to risks other than the general risk of operating. The above was also presented under Article 35d(4) Accounting Act.
‘The unused reserves, in view of the reduction or cessation of the risks justifying their creation, shall increase to the date on which the remaining operating revenue, financial revenue or extraordinary profits have proved unnecessary, respectively.’
The following point describes the situation of non-use, in part or in whole, of the ancillary cost adjustment in the event of a reduction or cessation of the risk justifying it.
It consists of a reduction in the passive cost settlement and a reduction in the operating costs incurred during the reporting period, in which it was found that the related liability was less or less incurred. The above was also presented under Article 39(5) Accounting Act.
‘The obligations included as passive accruals reduce the costs of the reporting period when they were found not to exist.’
Reserves and passive accruals of costs shall be inventoryd by comparing the data from the accounts with the relevant documents and verification of the actual value of the components. The inventory should take place at least on the last day of the financial year.
Further, CRS No 6 other detailed rules for the provision of reserves are described. A picture has been described, among others:
- provisions for liabilities arising from the effects of ongoing legal proceedings,
- provisions on guarantees granted,
- provisions relating to penalties or costs for the elimination of environmental damage,
- provisions for future liabilities due to restructuring,
- passive accruals of costs for future benefits to employees.
points 3.17 and 3.19 CRS No 6 the recognition of contingent liabilities has been presented. A conditional obligation shall take place when the existence of a benefit obligation depends on the occurrence of a specific event. Contingent liabilities are not included in the balance sheet. In addition, if an entity is subject to joint liability, that part of the obligation which cannot be fulfilled by the parties third, is treated as a contingent liability.
According to point 3.18. CRS No 6 compliance with the criteria relating to the recognition of an item as an obligation requires the existence of a current obligation to provide and the likelihood of an outflow of measures in order for the entity to fulfil that obligation.
[1] CRS No 6, point 1.1.
[2] CRS No 6, point 1.1.
[3] The legal obligation is the obligation of a specific conduct resulting from legal provisions (point 2.7. CRS No 6). In turn, a common obligation (called CRS No. 6 (a) by way of established past conduct, publication of the rules of conduct or a sufficiently specific, up-to-date statement, the entity has provided the parties with an obligation resulting from the entity's activities; third, (b) as a result of the above, the entity has raised an obligation on these parties third reasonable expectation that this obligation will be fulfilled.
[4] CRS No 6, point 3.2.