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Estimated liabilities and provisions: Interpretation and accounting issues under the Russian and international standards

Vol. 19, Iss. 21, NOVEMBER 2016

Received: 27 May 2016

Received in revised form: 11 July 2016

Accepted: 26 July 2016

Available online: 17 November 2016

Subject Heading: ACCOUNTING SYSTEMS ADAPTING

JEL Classification: M41

Pages: 2-18

Druzhilovskaya T.Yu. National Research Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russian Federation
tdruzhilovskaya@yandex.ru

Importance The article focuses on issues relating to the interpretation and accounting of certain provisions and estimated liabilities within the framework of the Russian GAAP and IFRS.
Objectives The research formulates recommendations to address interpretation and accounting issues in relation to some types of provisions and estimated liabilities.
Methods The methodological framework includes a critical analysis of the current regulation of the way estimated liabilities are formed, comparison of various scientific viewpoints on accounting issues of provisions, estimated liabilities and liabilities for employees’ annual leaves.
Results I presented the results of analyzing the interpretation of economic substance of the provision concept in scientific literature. I explained the substantial difference between the economic substance of provisions and estimated liabilities and the need to change the regulation of the way provisions for deferred expenses are accounted within the Russian GAAP. The article proves the insufficiency of estimated liabilities assessment regulations under the system. The article also narrates about the comparison of the interpretation and accounting requirements in relation to liabilities for employees’ annual leaves under the Russian GAAP and IFRS.
Conclusions and Relevance The economic substance of provision cannot equate with that of estimated liabilities in relation to accounting of deferred expenses provision under the Russian GAAP. Interpretations of estimated liabilities and their economic substance under the Russian GAAP and IFRS are similar but still have considerable difference. Approaches to recognition and accounting of liabilities for employees’ annual leaves substantially differ under the Russian GAAP and IFRS, thus necessitating the revision of some regulations. The results are of applied and theoretical nature for financial accounting.

Keywords: provision, estimated liability, payment, annual leave

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