Provisions in the annual accounts
A provision puts a future expense on the balance sheet in the year in which it was caused. The question is always: is there already an obligation, and can the amount be estimated?
The short answer
A provision is a liability item for an obligation that is probable or certain at the balance sheet date, but whose size or timing is uncertain (art. 2:374(1) DCC). You form it if an outflow of resources is probable and the amount can be estimated reliably. Cost equalisation, such as for major maintenance, is also permitted.
Updated 30 October 2026
Key facts
| Legal basis | art. 2:374 DCC; obligations that become known before preparation: art. 2:384(2) DCC |
| Guideline | RJ 252 Provisions, off-balance-sheet obligations and off-balance-sheet assets; RJ 271 (employees), RJ 272 (deferred taxes); RJk B10 for micro and small |
| Always separate | The provision for tax obligations and that for pension obligations (art. 2:374(4) DCC), except for micro and small |
| Not a provision | An impairment of an asset (art. 2:374(2) DCC): you write that off on the asset itself |
Legal framework and RJ 252
Article 2:374(1) DCC knows two kinds. The first covers obligations that are clearly defined by their nature and are probable or certain at the balance sheet date, but whose size or the time of arising is unknown. The second spreads charges evenly over a number of financial years: expenditure that you incur later but that originates partly before the end of the financial year.
For the first kind, RJ 252 sets three requirements: there is a legally enforceable or constructive obligation at the balance sheet date, it is probable that settlement requires an outflow of resources, and the amount can be estimated reliably. If one of the three is missing, you form no provision but disclose a contingent liability in the notes (art. 2:381(1) DCC), unless an outflow is very unlikely (RJk B10.204). A micro legal entity need not disclose this (art. 2:395a(6) DCC).
Medium-sized and large entities split provisions by nature, describe them precisely and indicate as far as possible which part is long-term (art. 2:374(3) DCC); for small this is voluntary (art. 2:396(3) DCC; RJk B10.109a). Measurement is the best estimate of the expenditure, nominal or, if the time value of money matters, discounted. With present value you book the annual unwinding as an interest expense.
The common provisions
| Type | When | Calculation |
|---|---|---|
| Warranty | You have delivered products or services with a warranty obligation | Experience percentage of turnover, tested against current claims |
| Major maintenance | Periodic maintenance that you do not include in the carrying amount of the asset | Build up evenly per maintenance component, nominal (RJ 212) |
| Reorganisation | There is a detailed plan and the expectation has been raised among those involved that it will be carried out | Direct costs of the plan |
| Jubilee benefits | Promised benefits at service anniversaries | Benefit × probability of staying, discounted |
| Onerous contract | The unavoidable costs are higher than the expected benefits | The lower of fulfilling or buying out (RJ 252, tightened since financial year 2022) |
| Deferred taxes | The commercial carrying amount temporarily differs from the tax one | Difference × the tax rate |
Each provision has four kinds of movements: addition (charged to the result), utilisation (the expenditure for which it was formed), release (what is no longer needed, to the benefit of the result) and possibly unwinding.
Worked example: warranty provision of an installation company
An installation company gives a two-year warranty. On 1 January 2025 the provision stands at € 9.000. In 2025 the company spends € 7.500 on repair work. Turnover is € 800.000 and from experience 1,5% of it comes back as warranty costs. On 31 December the board assesses the current claims and the expectation and arrives at a required balance of € 12.500.
| Movement 2025 | Amount |
|---|---|
| Balance 1 January | € 9.000 |
| Utilisation: repair work carried out | − € 7.500 |
| Addition charged to the result | + € 11.000 |
| Balance 31 December | € 12.500 |
| of which longer than one year | € 4.000 |
The journal entries: Warranty provision € 7.500 to Inventory and wage costs € 7.500, and Warranty costs € 11.000 to Warranty provision € 11.000. The addition is close to 1,5% of turnover (€ 12.000); the difference comes from the assessment of the claims.
Provisions per size class
Whether you form a provision does not depend on the size of the business. How you present it does. The limits are those for financial years from 1 January 2024. The class is determined by at least two of the three criteria, two balance sheet dates in a row; the exception for the first and second financial year is in art. 2:398(1) DCC.
| Class | Balance sheet | Notes and policy |
|---|---|---|
| Micro (balance sheet total ≤ € 450.000, net turnover ≤ € 900.000, < 10 employees) | Provisions as one amount (art. 2:395a(4) DCC) | None. Whoever chooses tax-based principles (art. 2:395a(7) DCC) applies the tax requirements for a provision |
| Small (balance sheet total ≤ € 7,5 mln, net turnover ≤ € 15 mln, < 50 employees) | One item; the tax and pension provisions need not be separate (art. 2:396(3) DCC, RJk B10) | Policy per type. The choice of tax-based principles is open (art. 2:396(6) DCC) |
| Medium-sized (balance sheet total ≤ € 25 mln, net turnover ≤ € 50 mln, < 250 employees) | Split by nature, with taxes and pensions separate, also publicly (art. 2:397(5) DCC) | Description per provision and the long-term part |
| Large (balance sheet total > € 25 mln, net turnover > € 50 mln, ≥ 250 employees) | As medium-sized | In addition the full disclosure of RJ 252 |
Stricter for tax than commercially
For taxable profit, the requirements from the Baksteen judgment of the Supreme Court (Hoge Raad) of 26 August 1998 apply. A liability item for future expenditure is allowed if that expenditure originates in facts or circumstances from before the balance sheet date, is also otherwise attributable to that period, and there is a reasonable degree of certainty that it will occur. Costs related to wage and price increases after the end of the year do not count (art. 3.26 Wet IB 2001, the Income Tax Act 2001).
For even distribution of costs the tax authority knows the equalisation reserve (egalisatiereserve) (art. 3.53(1) Wet IB 2001). Commercially that is a provision and therefore debt capital, for tax a reserve. In annual accounts on tax principles it is therefore presented differently than in commercial ones; see equalisation reserve.
Common mistakes with provisions
- Forming a provision for general risks or for losses you expect next year. Without an obligation at the balance sheet date it is a reserve and thus equity.
- Including holiday allowance and holiday days as a provision. Amount and timing are fixed: it is a current liability.
- Putting the write-down of debtors or inventory under provisions.
- Not disclosing a pending claim because the outcome is uncertain. Then the note is precisely mandatory.
The provisions register in Jaarrekening.io
The bookkeeping of Jaarrekening.io has a provisions register with additions, utilisations, release and unwinding and a movement schedule per provision and per type. Calculation aids propose an amount for major maintenance, present value, a warranty percentage and jubilee benefits. You confirm each amount and see the entry before it is booked. Whether the provision is justified and how high is decided by the board.
Sources
- Art. 2:374 DCC: provisions (wetten.overheid.nl)
- Art. 2:381 DCC: off-balance-sheet and contingent liabilities
- Art. 2:384 DCC: prudence and obligations after the balance sheet date
- RJ-Uiting 2021-10: onerous contracts, RJ 252 and RJk B10; final in July 2021 (rjnet.nl)
- RJ-Uiting 2022-8: maintenance provision, RJ 212 and 252
- RJ-Uiting 2025-10: RJk B10, presentation for micro and small
- Supreme Court (Hoge Raad) 26 August 1998, ECLI:NL:HR:1998:AA2555 (Baksteen)
- Art. 3.53 Wet IB 2001: equalisation reserve
Frequently asked questions
What is the difference between a provision, a reserve and a liability?
A liability is fixed in amount and timing. A provision is also an obligation, but its size or timing is uncertain. A reserve is equity: profit that has been retained, with no obligation to a third party. Provisions and liabilities are debt capital and weigh on solvency; reserves do not.
May I form a provision for a loss I expect next year?
No, not for future operating losses. The exception is an onerous contract: if the unavoidable costs of an agreement already concluded exceed the benefits, you provide for the difference. Unavoidable is the lower of the cost of fulfilling and the compensation or penalty for not fulfilling.
When do I release a provision?
As soon as it is no longer probable that you must make the expenditure, or if the amount needed turns out lower. You reassess each provision at the balance sheet date. The release benefits the result.
Does a small BV have to include a deferred tax liability?
Yes, if it reports on commercial principles and the commercial carrying amount of assets is higher than the tax one. It need not show that provision separately. If the BV prepares the annual accounts on tax principles, there are no valuation differences and therefore no deferred taxes.
How do I treat a lawsuit that is still pending?
Assess with your lawyer whether a judgement against you is probable and what amount would then be reasonable. If so, you form a provision for the best estimate. If the likelihood is lower or the amount cannot be estimated, you disclose the claim as a contingent liability (art. 2:381(1) DCC).
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