What constitutes a provision under IAS 37, and how does it differ from a contingent liability?

A provision under IAS 37 is a liability of uncertain timing or amount. It must be recognized on the balance sheet when there is a present legal or constructive obligation from a past event, a probable outflow of economic resources is required, and a reliable estimate can be made.

A contingent liability is a possible obligation, or a present obligation where an outflow is not probable or cannot be reliably measured. Contingent liabilities are never recognized on the face of the financial statements; they are only disclosed in the accompanying notes.