The 2019 IFRS-based balance sheet published by Volkswagen AG, the well-known German automaker, listed an account called "provisions" (divided into current and noncurrent categories) with a total balance (in million euros) of 46,217 (2019) and 44,754 (2018). The account covers obligations arising from sales and other miscellaneous items. Footnotes to the financial statements included the following statement and account information:
In accordance with International Accounting Standard (IAS) 37, provisions are recognized where a present obligation exists to third parties as a result of a past event; where a future outflow of resources is probable; and where a reliable estimate of that outflow can be made. Provisions ... are recognized at their (expected) settlement value discounted to the balance sheet date. Discounting is based on market interest rates.

INSTRUCTIONS:

a. Discuss differences between how provisions are accounted for under IFRS and how contingencies are accounted for under U.S. GAAP.
b. Explain how the increases listed above (20,572) affected the basic accounting equation, and list what kinds of items might be reflected in the 20,572 increase amount.
c. Explain how the decreases listed above (19,109) affected the basic accounting equation, and list what kinds of items might be reflected in the 19,109 decrease amount.

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December 31, 2018, balance 44,754 Increases 20,572 Decreases (19,109) December 31, 2019, balance 46,217