Kustannusvara

Kustannusvara is a term used in Finnish accounting to denote a liability set aside for expected future costs that relate to a present obligation arising from past events. It is recognized on the balance sheet when there is a probable outflow of resources to settle the obligation and the amount can be estimated reliably. A kustannusvara differs from ordinary expenses in that it represents an anticipated payment rather than a payment already made, and it is adjusted over time as more information becomes available.

The concept is closely aligned with international accounting standards such as IAS 37 Provisions, Contingent Liabilities and Contingent Assets. A kustannusvara is typically established to cover costs that are unavoidable but uncertain in timing or amount, such as warranties, environmental cleanup costs, onerous contracts, or restructuring obligations. It is measured at the best estimate of the expenditures required to settle the obligation, with revision when new information emerges.

Measurement and presentation follow general provisions for provisions. If the time value of money is material, discounting may be used to determine the present value of the expected outflows. Provisions are reassessed at each reporting date and adjusted to reflect changes in the estimate. They are classified as current or non-current liabilities based on the expected timing of settlement. Reversals occur when the obligation is settled or no longer probable.