How can I create provisions in the annual financial statements?
May 18, 2023 | 50,00 EUR | answered by Alice Heck
Dear tax advisor,
I have a question regarding provisions in the financial statements. As the managing director of a medium-sized company, I am wondering how to correctly establish provisions in the financial statements.
In the current situation: Our company is planning a restructuring in the near future, which will incur costs. However, it is still uncertain how high these costs will be and when they will arise. Additionally, there are ongoing legal disputes where payments may be due.
My concerns lie in not knowing exactly how to properly account for these uncertainties in the form of provisions in the financial statements. I want to avoid our company facing financial risks or the financial statements being inaccurately presented as a result.
Therefore, my question is: What options are available to establish provisions in the financial statements, especially in relation to uncertain liabilities such as restructuring costs and legal disputes? How can I ensure that the provisions are correct and adequate to accurately represent our company's financial situation?
Thank you in advance for your support and advice.
Best regards,
Alwin Koch
Dear Mr. Koch,
Thank you for your question regarding provisions in the financial statements. Provisions are important components of financial statements as they serve to account for future liabilities or risks, thus providing a realistic picture of a company's financial situation.
In your case, where you have uncertainties regarding restructuring costs and pending legal disputes, it is important to appropriately form provisions to minimize financial risks and present the financial statements accurately.
There are various ways to form provisions in the financial statements, especially in relation to uncertain liabilities. One option is to form provisions for impending losses. This means that based on your current assessment of restructuring costs and potential payments from legal disputes, you form a provision to account for these future liabilities.
It is important that you make a realistic estimate when forming provisions for uncertain liabilities. This can be achieved by incorporating expert opinions, historical data, or similar cases. It is also advisable to conduct regular reviews and adjustments of provisions to ensure they remain appropriate.
To ensure that provisions are correct and appropriate, you can also consult a tax advisor or auditor who can assist you in assessing and forming provisions. An expert can also help you meet the legal requirements for provisions and ensure the financial statements are prepared properly.
Overall, it is important that you carefully and transparently form provisions to accurately represent your company's financial situation and minimize financial risks. If you have any further questions or need assistance, I am happy to help.
Sincerely,
Alice Heck
Tax Advisor
