Back to the track — Financial Accountant

Depreciation and provisions: estimate what happened, not what you want

Depreciation begins when an asset is ready for use and allocates cost less residual value over useful life using a method reflecting benefit, with material components on distinct lives. Cost remains in the register and accumulated depreciation grows; estimates are reviewed and changed prospectively on evidence. A provision begins not with budget or fear but a past event creating a present obligation, probable outflow and reliably measurable best estimate. An accrual concerns a known supplier and service, a contingent liability may need disclosure rather than an entry, and changeable future maintenance creates no provision. Provision closing is opening plus additions less use and reversal, with unwinding when needed; paying a covered claim reduces the provision and does not repeat expense. Close requires reconciled asset cards and provision movements tied to populations, cases and references, not standalone balances that merely look reasonable.