Kolesnik N.F.National Research Ogarev Mordovia State University, Saransk, Republic of Mordovia, Russian Federation kolesniknf@mail.ru
Stanchulyak Yu.N.National Research Ogarev Mordovia State University, Saransk, Republic of Mordovia, Russian Federation Ulya2708@mail.ru
Importance The article discusses how corporate solvency is influenced by a chosen method for making provisions for contingent liabilities, as it is assessed through liquidity ratios. Objectives The research determines how provisions for contingent liabilities influence indicators of corporate solvency by choosing the most appropriate method of making provisions for annual leaves, doubtful debts and impairment of tangible assets. Methods The methodological underpinning relies upon such scientific methods as modeling, analysis, including financial ones, synthesis, comparison. Results We determined how various methods for making provisions for contingent liabilities impacted on corporate liquidity ratios and evaluation of the entity's solvency. The article proposes and substantiates techniques for making provisions for contingent liabilities, which allow for reliable results of corporate liquidity and solvency analysis. The article substantiates the need to make a provision for impairment of tangible assets so to accurately assess the current liquidity ratio and ensure the unbiased nature of financial reporting. Conclusions and Relevance As provided in accounting regulations in Russia, business entities shall make provisions for contingent liabilities. Deliberate evasion of such provisions should be qualified as artificial overstatement of assets in the balance sheet and manipulation with financial results. When choosing a method to make provisions for contingent liabilities, it is important to consider their different effect on financials and evaluation of the entity's financial position. The findings may be used by various businesses.
Keywords: contingent liabilities, provision for annual leave, provision for doubtful debts, provision for impairment, tangible assets, solvency
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