12 February 2009
As per Accounting Standard 29 on "Provisions, Contingent Liabilities and Contingent Assets" issued by ICAI:
A provision is a liability which can be measured only by using a substantial degree of estimation.
A provision should be recognised when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision should be recognised.
For more details read Accounting Standard 29 on "Provisions, Contingent Liabilities and Contingent Assets" issued by ICAI:
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