provision / deferral
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provision
In accounting, an amount set aside for future, uncertain liabilities or anticipated losses whose amount or timing has not yet been determined exactly.
Das Unternehmen musste eine hohe Rückstellung für Pensionsverpflichtungen bilden.
The company had to create a large provision for pension obligations.
'Rückstellung' comes from the separable verb 'zurückstellen' (to put back/postpone). The basic idea of 'zurückstellen'—setting something aside or postponing it for a later point in time—connects all the meanings: money for the future, an obligation for later, or a decision.
Wir müssen die Entscheidung über den neuen Standort zurückstellen.
We have to postpone the decision about the new location.
This word is used almost only in formal contexts. Depending on the meaning, it belongs to the technical language of finance (accounting) or to official language (official applications and procedures).
Der Antrag auf Rückstellung wurde in formeller Sprache verfasst.
The application for deferment was written in formal language.
The context indicates the meaning. Words like 'Bilanz' (balance sheet), 'Kosten' (costs), or 'Pensionen' (pensions) point to the financial meaning. 'Wehrdienst' (military service) or 'Militär' (military) point to exemption from an obligation. 'Antrag' (application) or 'Entscheidung' (decision) point to a postponement.
Die Firma bildete eine Rückstellung für erwartete Prozesskosten.
The company created a provision for expected legal costs.
In a financial context, the most important fixed combinations are 'Rückstellungen bilden' (to create provisions; to reserve money for a purpose) and 'Rückstellungen auflösen' (to release provisions; to free up the reserved money again).
Für mögliche Garantiefälle muss das Unternehmen eine Rückstellung bilden.
The company has to create a provision for possible warranty claims.
reserve
'die Reserve' and 'die Rückstellung' can both refer to money that is set aside for later. 'Reserve' is a general word and also works in everyday language: you have a reserve for emergencies. 'Rückstellung' is a technical term from accounting. It means money that a company sets aside for future costs or losses that are still uncertain. Learners may confuse the words because in both cases money is not spent immediately. In private everyday life, people usually say 'Reserve'. In accounting, 'Rückstellung' is more precise.
Die Firma bildet eine Rückstellung für mögliche Kosten im nächsten Jahr.
The company creates a provision for possible costs next year.
Für unerwartete Reparaturen haben wir eine finanzielle Reserve.
We have a financial reserve for unexpected repairs.