There are very important differences between U.S. and international standards regarding contingencies. Even the terms used to refer to situations with unknown outcomes differ. Explain these differences
International standards use the term provision for those items that must be recorded on the balance sheet. As in U.S. standards, an item should be recorded if the loss or outflow is probable and can be reasonably estimated.
However, the meaning of the term probable is somewhat different. In international standards, probable means the loss or outflow is "more likely than not" to occur. This is a lower threshold than in U.S. standards and may cause more items to be recorded as liabilities.
In addition, international standards require the amount recorded as a liability to be "discounted" or recorded as a present value amount, while U.S. standards do not have a similar requirement.
In international standards, the term contingent liability is used only for those items that are not recorded on the balance sheet but are disclosed in the notes that accompany the statements.
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