Nope it's quite simple. You think you owe some money so make a provision of x in a financial year. That's a loss of x in the financial year.
You have not actually spent any cash.
Later on the person you owe the money to asks for the cash but you have a chat and they decide you only have to pay them a smaller amount which we will call y.
So in the year you pay them you are up in cash terms by x-y
What's difficult for accountants is whether you have now made a windfall profit. and it's important because the banks have managed to get some huge tax losses which they may never need to realise.
If you have an opinion on IAS 37 I'd be interested
I think what Al was referring to was your maths, it should be £2.865 not £1.865.