Article 2:374 DCC: provisions on the balance sheet
Article 2:374 of the Dutch Civil Code (DCC) says when a provision belongs on the balance sheet, when it does not, and how you classify and explain provisions.
The short answer
You recognise a provision for a clearly described obligation that at the balance sheet date is probable or certain, but whose amount or timing is uncertain. In addition you may form a provision to spread large future expenditure, such as major maintenance, over the years. An impairment of an asset is not a provision. Tax and pension provisions are shown separately.
Updated 30 October 2026
Key facts
| Location | Division 3, § 3 (Liabilities) |
| Current text since | 27 July 2005 (Stb. 2005, 377) |
| Financial years | The statutory text applies to all three years. For 2027, RJ 252 and RJk B10 have been updated, with a few new paragraphs in the RJk |
| Further rules | RJ 252, with RJ 271 (pensions) and RJ 272 (taxes); RJk B10 |
Paragraph 1: two kinds of provisions
1. Provisions are recognised on the balance sheet against obligations clearly described by their nature that at the balance sheet date are regarded as probable or certain, but for which it is not known to what extent or when they will arise. Provisions may also be recognised against expenditure that will be incurred in a subsequent financial year, to the extent that the incurring of that expenditure originates in part before the end of the financial year and the provision serves to spread charges evenly over a number of financial years.
What this means
The first sentence is a duty: if at the balance sheet date there is an obligation, it is probable that it will cost money and you can estimate the amount reasonably, you form a provision (RJ 252.201; RJk B10.105). Think of warranty claims, a lost lawsuit or a loss-making contract. You recognise the best estimate, discounted if the time effect is material; for settlement within a year the nominal amount is allowed (RJ 252.301 and 252.306; RJk B10.106).
The second sentence is an option: an equalisation provision to spread large expenditure that partly arises already now over the years. The best-known example is the provision for major maintenance. In addition, the RJ permits treating major maintenance as part of the asset and depreciating it (RJ 212.448 and 212.451; RJk B2.122).
What is not a provision: expected losses from next year's ordinary business operations (RJ 252.402) and a provision for risks that you do not insure (RJ 252.422; both in RJk B10.103). And a provision is not called a reserve: it is debt capital (RJk B10.109).
Paragraph 2: no provision for impairments
2. An impairment of an asset is not expressed through the formation of a provision.
What this means
Doubtful debtors, slow-moving inventory, a machine that has become worth less: you process these by measuring the asset lower, not through an item on the liabilities side. In the bookkeeping an account may be called 'provision for debtors', but on the balance sheet it appears as a deduction from the receivables (RJ 252.104; RJk B10.104).
Paragraphs 3 and 4: classification and notes
3. Provisions are broken down by the nature of the obligations, losses and costs against which they are made; they are accurately described according to their nature. The notes indicate as far as possible to what extent the provisions must be regarded as long-term.
4. In any event the following are recognised separately:
a. the provision for tax obligations that may arise after the financial year but must be attributed to the financial year or a preceding financial year, including the provision for taxes that may result from measurement above the acquisition or production cost;
b. the provision for pension obligations.
What this means
Each type of provision gets its own name and amount. You state the long-term part as far as possible: what is settled within a year counts as current, the rest as non-current (RJ 252.507). Two types are always separate: the provision for deferred taxes, arising among other things from a revaluation or from differences between tax and commercial depreciation, and the pension provision, such as a pension promise that the BV administers itself.
Medium-sized and large entities also give the movement per type: opening balance, additions, utilisation, release and closing balance, with the nature, the basis and the main uncertainties (RJ 252.502 and 252.503). For small, the RJk suggests considering that movement (RJk B10.109a).
Case: four provisions at a kitchen builder
Brugwater Keukens BV (fictitious, medium-sized) sold € 8 million of kitchens in 2025 with two years' warranty. From earlier years it knows that claims cost about 0.75% of turnover. A former employee claims € 40.000 and the lawyer expects Brugwater to lose. The roof of the workshop will be replaced in 2027 for € 120.000; Brugwater has been building a provision for this since 2023 of € 30.000 a year. Because of faster tax depreciation, there is a deferred tax liability of € 55.000.
| Provision 31-12-2025 | Current | Non-current | Total |
|---|---|---|---|
| Warranties (0.75% of € 8 million) | € 35.000 | € 25.000 | € 60.000 |
| Claim by former employee | € 40.000 | – | € 40.000 |
| Major maintenance roof (3 × € 30.000) | – | € 90.000 | € 90.000 |
| Deferred taxes (paragraph 4(a), separate) | – | € 55.000 | € 55.000 |
| Total | € 75.000 | € 170.000 | € 245.000 |
Two things Brugwater deliberately does not recognise. It expects lower turnover and possibly a loss in 2026; it forms no provision for that. And on a bankrupt customer it expects not to receive € 18.000; it deducts that amount from the debtors, not from the provisions.
As a medium-sized entity, Brugwater also publishes the breakdown by type and the separately shown tax provision (art. 2:397(5) DCC). Had it been small, one item of provisions of € 245.000 on the balance sheet would have been enough; the rules on when and how much remain the same. As micro, the amount appears as one item of provisions in the abridged balance sheet.
By size class
| Class | What applies |
|---|---|
| Micro | Paragraph 1 applies: one item of provisions (art. 2:395a(4) DCC); no breakdown or notes. |
| Small | Paragraphs 1 and 2 apply in full. The breakdown and the disclosures of paragraphs 3 and 4 are not among the required disclosures for small (art. 2:396(3) DCC); RJk B10.109a suggests considering them. |
| Medium-sized | All paragraphs, with the movement per type of provision (RJ 252.502); paragraphs 3 and 4 also in the published balance sheet (art. 2:397(5) DCC). |
| Large | As medium-sized. |
Common mistakes
- Forming a provision for expected losses of next year.
- Showing a provision for doubtful debtors or slow-moving inventory on the liabilities side.
- Using a provision for expenditure other than that for which it was formed (RJk B10.102).
- Not discounting a long-term provision with a large time effect.
- Booking a certain debt with a fixed amount, such as a received invoice, as a provision.
Sources
Frequently asked questions
When must I form a provision?
If at the balance sheet date there is a legally enforceable or constructive obligation, it is probable that it will lead to an outflow and you can estimate the amount reliably (art. 2:374(1) DCC; RJ 252.201, RJk B10.105). You recognise the best estimate. If one of the conditions is not met, you disclose the obligation in the notes at most.
Is a provision for doubtful debtors a real provision?
No. An impairment of an asset may not be shown as a provision (art. 2:374(2) DCC). The amount is deducted from the debtors; the balance sheet shows the receivable net.
May I form a provision for major maintenance?
Yes. Art. 2:374(1), second sentence, DCC permits a provision to spread future expenditure evenly over the years. According to the RJ you may also treat major maintenance as part of the asset and depreciate it. Choose one method and apply it consistently.
Must a small BV break down its provisions?
Not under the law: a small entity may show provisions as one item (art. 2:396(3) DCC). The RJk advises explaining the nature and movement where this serves the true and fair view. Medium-sized and large entities break them down by type, with the tax and pension provisions separately.
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