These are burdens on the profits made to face any confirmed or unconfirmed losses whether or not the value is fixed. These provisions are considered current liabilities and are included in the income statement, whether the Incorporated Body has achieved profits or not.

1. Types of provisions:

   • Provision for depreciation of assets.

   • Provision for doubtful debts.

   • Provision for stagnant inventories.

   • Provision for slow-moving goods.

   • Provision for obsolete goods.

   • Other provisions.

2. Deductions for provisions made by the Incorporated Body are not allowed, however, the actual costs spent by the Incorporated Body from these provisions are allowed. For example;

   • Bad debts written off supported by the judicial rulings.

   • Expenditures of stagnant and slow-moving inventories, in accordance with their supporting documents.

   • Expenditures of obsolete goods which are actually destroyed after notifying the Tax Department to have their representative attend or which are supported by a certificate issued from the respective body.

   • Actual expenses of other provisions are accepted in accordance with the supporting documents thereof.

Second: Reserves:

These are a distribution of the profits made to face the potential losses or to enhance the financial position of the Incorporated Body. Reserves shall be deemed as equity and are included in the statement of changes in equity. Such reserves are not made unless profits are realized.

All types of reserves are not accepted, except for some reserves for the banking and insurance sectors, in accordance with rules and instructions imposed by the controlling bodies.

Third: Special and exceptional cases relating to provisions and reserves shall be treated separately after consulting the Tax Department in this regard.