What are provisions: definition and three main categories?

A provision is a liability of uncertain timing or amount. It reflects a present obligation from a past event where an outflow is expected and can be estimated.

• Operating provisions: warranties, bonuses, rebates, returns
• Legal / risk provisions: litigation, environmental, tax disputes
• Structural provisions: restructuring, onerous contracts, asset retirement obligations

Provisions affect EBITDA, working capital, net debt-like items, and QoE. Releases can inflate earnings; under-accruals can hide future cash outflows.