Provisions should be reassessed at each year-end.

Provisions should be reassessed at each year-end.

• A. They are reviewed only when cash outflow occurs.
• B. They are reassessed at each year-end.
• C. They are never reassessed after initial recognition.
• D. They are reassessed only if the estimate changes.

Answer: (B)

Provisions are reviewed at each reporting date to keep their carrying amounts aligned with the latest information about the obligation. As new information becomes available—such as changes in costs, timing of outflows, or discount rates—the estimated amount of the provision may rise or fall. Reassessing at year-end ensures the liability reflects the current best estimate and the present value of expected outflows, rather than the original amount. This ongoing review is necessary even if no new information has changed the estimate, and it isn’t limited to situations where cash actually leaves. It also isn’t only triggered by changes in the estimate—the act of regularly re-evaluating at year-end is the mechanism that keeps the measurement up to date. If new information indicates the obligation is less likely or the amount differs, the provision is adjusted accordingly; if circumstances indicate no present obligation exists, the provision would be reversed.

Provisions are reviewed at each reporting date to keep their carrying amounts aligned with the latest information about the obligation. As new information becomes available—such as changes in costs, timing of outflows, or discount rates—the estimated amount of the provision may rise or fall. Reassessing at year-end ensures the liability reflects the current best estimate and the present value of expected outflows, rather than the original amount.

This ongoing review is necessary even if no new information has changed the estimate, and it isn’t limited to situations where cash actually leaves. It also isn’t only triggered by changes in the estimate—the act of regularly re-evaluating at year-end is the mechanism that keeps the measurement up to date. If new information indicates the obligation is less likely or the amount differs, the provision is adjusted accordingly; if circumstances indicate no present obligation exists, the provision would be reversed.