Date recorded:

Costs considered in assessing whether a contract is onerous (IAS 37)—Possible narrow-scope standard-setting (Agenda Paper 12C)


In November 2017 the IFRS Interpretations Committee decided to add a project to clarify the meaning of the term ‘unavoidable costs’ in the definition of an onerous contract in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The Committee discussed this project at its March and June 2018 meetings and is asking whether the IASB agrees with its recommendation to propose:

  • a) Narrow-scope amendments to IAS 37 to:
    • Specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’; and
    • Provide examples of costs that do, and do not, related directly to a contract to provide goods or services
  • b) Not to propose new any new disclosure requirements
  • c) Specific transition requirements for entities already reporting under IFRS, requiring them 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), but no specific transition requirements for entities adopting IFRS for the first time.

Staff recommendation

The staff themselves did not recommend any decisions. They asked the Board whether they agree with the Committee’s recommendation as stated above.



In a brief discussion there were some concerns raised about the term “relate directly” as opposed to using “attributable” or even “directly relate” which are used in other Standards. It was confirmed that the terms all had the same meaning and were interchangeable and that “relate directly” was used as that is the terminology used in IFRS 15 Revenue from Contracts with Customers, a more recently issued Standard and one which relates to contracts. It was agreed that the term should be unified where possible throughout the Standards and that “relate directly” was acceptable.


The Board approved the Committee’s recommendation.

Transactions involving commodities and cryptocurrencies—Potential new research project (Agenda Paper 12D)


In January 2018 the IASB discussed commodity loans and related transactions, including cryptocurrencies. At that meeting the staff were asked to research: whether the transactions that might be within the scope of any standard-setting project are widespread and could have a material effect on IFRS reporters; and possible narrow-scope standard-setting activities the Board might undertake.

The staff provided the Board with additional information about the prevalence and magnitude of the transactions identified at the January 2018 meeting and asked how the Board wishes to proceed.

Outreach activities and feedback

Commodities and other investments

The staff’s research indicates that commodity transactions are widespread. Feedback suggests that the Board should consider an investments standard (“Approach A”) or amendments to the scope of existing IFRS Standards (“Approach B”).

The staff do not believe they have obtained sufficient evidence to suggest that developing an investments standard would be a higher priority than other projects already on the Board’s work plan and research pipeline. Therefore the staff recommend that the Board does not consider Approach A further at this time and instead consider this project as part of the next Agenda Consultation.

The staff believe the feedback received suggests the Board could consider to undertake a narrow-scope standard-setting project to address transactions that existing IFRS Standards do not specifically apply to. For example the Board could amend the scope of IFRS 9 to specifically include financing transactions for which the principal amount is a commodity traded in an active market. The staff recommend that the Board considers further the feasibility of using Approach B to address commodity loans at a future meeting.


Although the number of cryptocurrency transactions are increasing the staff do not believe there is sufficient evidence to suggest that the IFRS reporting questions that arise are of such significance that a project on cryptocurrencies should be a higher priority than other projects already on the Board’s work plan and research pipeline. Therefore the staff recommend that the Board does not add a standard-setting project to its work plan on cryptocurrencies at this time.

However, given the uncertainty about how to account for some cryptocurrency transactions the staff see benefit in considering short-term work that might help entities apply existing IFRS Standards to cryptocurrency transactions. The staff recommend that the Board consider referring aspects of the accounting for cryptocurrencies to the Committee, in particular: holding cryptocurrencies and initial coin offerings (ICOs).

The holding of cryptocurrencies by IFRS reporters is becoming increasingly prevalent in some jurisdictions and the research indicates differing reporting practices applied in accounting for such holdings. Although only a few IFRS reporters had raised finance through an ICO before or during 2017, a number reported that they intend to undertake, or already had undertaken, an ICO during 2018.

The staff think the Committee could consider publishing an agenda decision outlining how an entity might walk through existing IFRS requirements in determining how to account for cryptocurrencies that it holds and/or an ICO transaction and the disclosure requirements that an entity holding cryptocurrencies and/or raising finance through an ICO would be required to consider.

The staff are not aware of any significant IFRS reporting questions related to the mining of cryptocurrencies and therefore think there is insufficient evidence at this time to recommend any further work in this respect.

Staff recommendations

The staff recommended that the Board:

  • a) Consider further the feasibility of a narrow-scope standard-setting project to address commodity loans at a future meeting
  • b) Do not consider further developing an investment standard at this time, but instead ask stakeholders about the respective priority of such a project in the next Agenda Consultation
  • c) Refer to the Committee the consideration of how an entity might walk through existing IFRS requirements in determining its accounting for (i) holdings of cryptocurrencies and (ii) ICOs


The staff provided the Board with additional information about the prevalence and magnitude of the transactions identified at the January 2018 meeting.

There was a concern raised that as there is currently no Standard for commodity loans, it would be difficult to perform a narrow-scope standard-setting project to address the issue. The staff responded by clarifying that the staff’s recommendation is to consider further the feasibility of a project, which would take this concern into account.

A query was raised as to which Standard would be amended and whether the amendment would specifically address commodity loans or also include other similar transactions. The staff responded that, as that was unclear at the moment, the further research proposed would help specify. It was also discussed that it would not necessarily be straight-forward as there could be many different forms of transactions with similar outcomes and scoping could be quite difficult. The purpose of the transaction could also impact what would be considered to be the most appropriate accounting treatment.

It was then discussed that the next Agenda Consultation was expected to take place in 2021 and any Standard or similar that resulted from that would be a further three years away. Most Board members said this was too long to wait, given the exponential growth of cryptocurrencies. There were also concerns that it is unclear how cryptocurrencies will develop and how regulators will respond as well as the apparent diversity in practice which is not based on words in the Standards and therefore a timely response is key.

It was agreed that it was too early to instigate standard-setting and that regulators should take the lead, otherwise standard-setting could legitimise the sector.

Several Board members agreed that it would be beneficial to use the Committee’s skills to determine how the existing Standards apply and where they lead financial reporters to when accounting for cryptocurrency, with the holding of cryptocurrencies being the most pervasive issue for financial reporting. The Board could then use this analysis as another set of information to support any response.

In the longer term an investments standard might be worth pursuing but in the meantime it would be important to remind financial reporters of the requirement to disclose useful information as part of an Agenda Decision or a similar pronouncement. .


The Board agreed with the staff’s recommendations.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.