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Two forms of estimated liabilities (IAS 37)

-Provisions (liabilities which are uncertain in timing or amount)

-Contingent Liabilites (possible obligation where either the amount cannot be reliably measured or the outflow is not probable)

A Provision would be recorded as a normal liability however it would be measured at the Present Value of the best estimate required to settle the obligation

(also requires substantial note disclosure) Note: Will result in defered tax!

A Contingent liability will result in only note disclosure- and thus will have no effect on the quantintative aspect of the financial statments.

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Q: How does estimated liabilities affect the financial statements?
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