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Provisions (Possible Amendments to IAS 37) [Research]

Next steps:

The IASB is carrying out research to decide whether to start a project to develop proposals to amend aspects of IAS 37 and, if so, which aspects of IAS 37 to amend. The IASB expects to review its research in Q4/2019

Last updated:

July 2019

Overview

Stakeholders have told the Board that IAS 37, Provisions, Contingent Liabilities and Contingent Assets, generally works well in practice—it doesn’t need fundamental review. However, they have identified problems with some aspects of IAS 37.

One problem stems from the existence of two different principles in IAS 37 for identifying liabilities. The principles appear contradictory and have resulted in inconsistent and sometimes unsatisfactory requirements. IFRIC 21, Levies, an interpretation of IAS 37, has been criticised for resulting in information that is not useful to investors.

Some stakeholders have also suggested that the Board should review aspects of the IAS 37 requirements for measuring provisions. There is diversity in practice because IAS 37 does not specify:

  • whether a provision for an obligation to deliver goods or services should comprise only the incremental costs of fulfilling the obligation or also include an allocation of directly related overheads; or
  • whether the carrying amount of the provision should be reduced by the risk of non-performance by the entity (sometimes called ‘own credit risk’). 

Having issued its revised Conceptual Framework in March 2018, the Board is now updating its IAS 37 research to decide whether to start a project to develop proposals to amend aspects of IAS 37 and, if so, which aspects of IAS 37 to amend.

Other Developments

July 2019

On July 29, 2019, the IASB® staff updated the work plan to indicate that the Board expects to review its research in Q4/2019.

December 2018

On December 14, 2018, the IASB Staff added this project to the IASB’s work plan.

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