In the case of reserves and provisions, the addition is one of the instruments for changing these balance sheet items . In addition, there are additions in these balance sheet items nor the use (when the reserves / provisions are used for the intended purpose) and the resolution (when the reserve / provision is no longer needed). Under accounting law, the release of reserves is only permitted in a few cases. On the assets side of the balance sheet, the terms addition and disposal exist as counterparts for fixed and current assets .
Formation of feeders
Allocations increase the balance sheet items of reserves and provisions. Both increases in these balance sheet items of liabilities are made from the income statement . While the allocation to the provisions represents an operating expense , the allocation to the reserves is a appropriation of profit , because allocations to the retained earnings must be shown under the item “ annual surplus ” according to (4) HGB . The addition to the provisions is the result of a commercial decision that a certain matter will most likely lead to a later liability . Allocations to reserves are made by law ( (1 ) AktG ) or voluntarily.
Positive and negative advancement
If the reserve or provision increases, it is also referred to as a positive addition , if it decreases, it is sometimes referred to as a negative addition (release).