APPLICATION OF PROFESSIONAL JUDGEMENT IN THE RECOGNITION OF PROVISIONS. THE CASE OF BSE LISTED COMPANIES

Abstract

The equity of an entity reflects the wealth of its owners, which is, in effect, the residual interest of the shareholders in the assets of the entity after deducting liabilities. In determining shareholders' net assets, all liabilities of the entity must be taken into account, including uncertain or contingent liabilities such as provisions. The nature, opportunity and value of provisions should be disclosed in the explanatory notes to provide full information to interested parties. This work focused in particular on the analysis of provisions, because over time, provisions have been difficult to interpret due to their subjective and cashless nature, and these features describe their vulnerability to manipulation. The research objective of the authors is, on the one hand, to present the aspects concerning the recognition and valuation of provisions, i.e., to detail the main peculiarities of provisions, according to IAS 37, and, on the other hand, to analyse the implementation of the international standard IAS 37 ,,Provisions, contingent liabilities and contingent assets" in entities listed on the Bucharest Stock Exchange, on the regulated market. Thus, the authors aim to analyse the presence of provisions reported by entities listed on the Bucharest Stock Exchange on the regulated market, as well as the areas in which these items are of significant importance.