The board of directors of Alaala-Pi Co. decided on December 15, 20x1 to wind up international operations in Country B and move them to Country C. The decision was based on a detailed formal plan of restructuring, which was conveyed to all workers and management personnel at the headquarters in Country A. The cost of restructuring the operations in Country B as per this detailed plan was P10M. Should Alaala-Pi recognize a provision on December 31, 20x1? Yes, because all the recognition criteria are met No, because the obligation has an improbable outflow No, because there is no present obligation as of December 31, 20x1 No, because the outflow cannot be reliably estimated

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Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.