What is the difference between a provision and a contingent liability under IAS 37?

Under IAS 37 a provision is recognized on the balance sheet when three tests are met: there's a present obligation (legal or constructive) arising from a past event, an outflow of resources is probable (more likely than not), and the amount can be estimated reliably. It's measured at the best estimate of the expenditure to settle, discounted if the time value is material. A contingent liability is NOT recognized — only disclosed in the notes — when either the obligation is only possible (depends on uncertain future events outside the entity's control), or a present obligation exists but an outflow isn't probable or can't be reliably measured. If the chance of outflow is remote, you don't even disclose. The judgement hinges on 'probable vs possible' and reliability of estimate — the classic exam trap is recognizing a mere possible obligation, or failing to provide for a probable one.