A free reserve (a general reserve) is a type of reserves that are available for distribution as dividends (as of the latest audited balance sheet of an entity). Free reserves can be voluntarily created as an entity deems appropriate and needed. Free reserves do not include, or are not created out of, any amounts representing unrealized gains, notional gains or revaluation of assets, as well as any any changes in carrying amount of assets or liabilities recognized as part of equity, including fair value gains/ surplus income on measurement of assets or liabilities at fair value.

Examples of free reserves include the following:

• Contingencies (contingency reserves).
• Dividend equalization reserves (dividend equalization accounts).
• Investment fluctuation reserves.
• Staff compensation funds.
• Insurance funds.
• Sinking funds.