Question - Provisions are recognised as a liability in the statement of financial position whereas contingent liabilities are not recognised in the financial statements but disclosed in the notes to financial statements. Paragraph 12 of AASB 137/IAS 37 Provisions, Contingent Liabilities and Contingent Assets states that 'in a general sense, all provisions are contingent because they are uncertain in timing or amount'.
Required:
1. Discuss possible reasons as to why provisions are recognised in the financial statements whilst contingent liabilities are not.
2. Determine whether the following items would be classified and recoded as liabilities or not (provide a brief explanation for your decision):
a. Provision for long-service-leave;
b. Dividends payable;