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Treatment of accounting Provisions Accounting provisions are defined as uncertain liabilities as to timing and amount that are created to cover potential future obligations, based on a number of considerations outlined in relevant accounting standards. Article 24 of the regulation clarifies the treatment of accounting provisions when calculating the Zakat base, based on their nature. All provisions presented in the Statement of Financial Position are treated as equity and added to the Zakat base, except for provisions that represent a stable debt owed by the Zakat payer to non-owners, such as end-of-service benefit provision, vacation leave provision, etc. When treating provisions as liabilities, the rules applicable to liabilities are applied to them, including their addition to the base along with other added provisions within the limits of deductible assets, and their connection to the above placement rules. Also, when treating provisions as equity, the rules applicable to equity are applied to them, allowing their addition to the base without limit, and their inclusion in the maximum limit of the base, as will be clarified. Asset retirement provision Legal cases provision Zakat and tax provision Employee benefits Liabilities provision Vacation provision Employee tickets provision Examples of provisions treated as Equity Examples of provisions treated as liabilities: The following table shows the analysis of Provisions for a company at the end of the year Example (13) Provision End-of-period balance Employee benefits liabilities 120,000 SAR Provision for Legal Claims 90,000 SAR Vacation provision 77,000 SAR Provision for Site Restoration 45,000 SAR Provision for Zakat and tax 60,000 SAR How are the above provisions classified for Zakat purposes? The solution: The following provisions are treated as equity: Provision End-of-period balance Provision for Legal Claims 90,000 SAR Provision for Site Restoration 45,000 SAR Provision for Zakat and tax 60,000 SAR Whereas the following provisions are treated as liabilities: Provision End-of-period balance Employee benefits Liabilities 120,000 SAR Vacation provision 77,000 SAR 3.4.6 Updates on the adjustments to the activities results The result of activities is adjusted to arrive at the adjusted net profit or adjusted net loss. Article sixty-two clarifies the general controls for accepting the deduction of expenses. Article sixty- three includes specific conditions and considerations for certain specified expenses. Among the emerging provisions included in the regulation regarding the adjustment of the net result of activities are the acceptance of the deduction of provisions formed during the year, the acceptance of the expense of Zakat or income tax paid, and the acceptance of the difference in wages that exceeds the amount recorded in social insurance, provided that supporting documents acceptable to the authority are presented. Additionally, the regulation has added some controls related to accepting the expense of bad debts. Details regarding the treatments of adjustments to the result of activities will be discussed in paragraph (4.2.2) of this guideline. The analysis of the general and administrative expenses of Al Noor Company at the end of its Zakat year included the following expenses: Zakat expense amounting to 84,000 SAR. Provision for lawsuits amounting to 12,000 SAR. Salaries and wages amounting to 120,000 SAR. Upon examination, it was found that the amount registered with the General Organization for Social Insurance (GOSI) was 100,000 SAR, and documents prove that the difference (20,000 SAR) represents allowances that cannot be registered in the social insurance system. What expenses are not accepted according to the treatments in the regulation? The solution: All the mentioned expenses are accepted for zakat purposes according to the regulations' treatments, and there is no need to adjust the result of activities.