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. In essence all provisions are contingent because they are uncertain in timing or amount however there are number of reasons why provisions are recognised in the financial statements but contingent liabilities are not.

Required

Outline the reasons why provisions are recognised in financial statements and the reasons why contingent liabilities are not recognised in the financial statements.