Dilapidations provision

Money set aside in the accounts for a liability you know is coming.

What it means

A provision recognises a liability of uncertain timing or amount where there is a present obligation and a reliable estimate can be made.

Why it matters

It spreads a known future cost — dilapidations, warranty claims, restructuring — across the periods that caused it rather than the one that pays it.

What it looks like in practice

Accounting standards set conditions for when a provision may be recognised. A general "rainy day" provision is not permitted.

What to watch out for

Provisions used to smooth profits between years, which is not permitted and is a classic audit finding.

Where to get proper advice

Your accountant, who can produce most of these from data they already hold.