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Onerous Contracts—Cost of Fulfilling a Contract (Amendments to IAS 37) [ED]

Comment period ends on April 15, 2019

Next steps:

The IASB expects to finalize the amendments to IAS 37 in the first half of 2020

Last up­dated:

October 2019

Overview

At its meeting in July 2018, the International Accounting Standards Board (IASB) decided to undertake narrow-scope standard-setting to clarify the meaning of the term 'unavoidable costs' in the IAS 37 definition of an onerous contract.

The Board discussed the IFRIC’s recommendation to propose a narrow-scope amendment to IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The proposed amendment relates to the assessment of whether a contract is onerous, and would:

  • specify that the ‘cost of fulfilling’ a contract in paragraph 68 of IAS 37 comprises the ‘costs that relate directly to the contract’;
  • provide examples of costs that do, and do not, relate directly to a contract to provide goods or services.
  • make no new requirements for entities to disclose information about onerous contracts.
  • make specific transition requirements for entities already reporting using IFRS Standards. Such entities would be required to apply a ‘modified retrospective’ approach whereby they would apply the proposed amendments to contracts existing at the date of initial application—the beginning of the annual reporting period in which the entity first applies the amendments.
  • make no specific transition requirements for entities adopting IFRS Standards for the first time.

All Board members agreed with the recommendation.

 

Other de­vel­op­ments

October 2019

On October 25, 2019, the IASB® staff updated the work plan to indicate that the Board expects to finalize the amendments to IAS 37 in the first half of 2020.

On October 1, 2019, the IASB® staff updated the work plan to indicate that the Board expects to issue the final IFRS amendments to IAS 37 (no date specified).

July 2019

On July 29, 2019, the IASB® staff updated the work plan to indicate that the Board expects to decide the project direction in September 2019.

May 2019

On May 18, 2019, the IASB® staff updated the work plan to indicate that the Board expects to decide the project direction (no date specified).

April 2019

On April 12, 2019, the IASB® staff updated the work plan to indicate that the Board plans to review the Exposure Draft feedback in May 2019.

January 2019

On January 25, 2019, the IASB® staff updated the work plan to indicate that the Board expects to review the Exposure Draft feedback in Q2/2019.

On January 10, 2019, the AcSB issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by April 15, 2019.

December 2018

On December 14, 2018, the IASB staff updated the work plan to indicate that the Board expects to review the Exposure Draft feedback in the first half of 2019.

On December 13, 2018, the IASB published an Exposure Draft Cost of Fulfilling a Contract (Proposed amendments to IAS 37)"considering costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. Comments are requested by April 15, 2019.

September 2018

On September 20, 2018, the IASB staff updated the work plan to indicate that the Board plans to issue an Exposure Draft in December 2018.

July 2018

At its meeting in July 2018, the IASB decided to undertake narrow-scope standard-setting to clarify the meaning of the term 'unavoidable costs' in the IAS 37 definition of an onerous contract.

 

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