General Provisions
A balance sheet item representing funds set aside by a company to pay for losses that are anticipated to occur in the future. The actual losses for the earmarked funds have not yet occured, but the general provisions account is counted as an asset on the balance sheet. For banks, a general provision is considered to be supplementary capital under the first Basel Accord. Investopedia Says:
General provisions are found most often on the balance sheets of financial firms. For example, a bank would set aside funds in the case of a set of questionable loans. General provisions are considered to be a higher risk asset, because it is assumed that the underlying funds will be in default in the future. Related Terms:
Balance Sheet
Bank
Basel Committee On Bank Supervision
Capital Adequacy Ratio - CAR
Default
Undisclosed Reserves |