Severance & Provisions

What does this film teach?

How the severance liability is estimated and adjusted, and where the line runs between a provision and a mere disclosure.

What do you enter?

• The current severance ceiling and a date
• The accounts for provision and expense
• Each provision with its nature and estimate

Its effect

• A two-line adjustment entry, up or down
• Payment consumes the provision
• Contingent items produce no entry at all
• Next: Chart of accounts & journal (Film 30)