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Provisions

Date recorded:

Project update (Agenda Paper 22)

Background

In this session, the staff provided the Board with an update on the Provisions research project that has recently been reactivated.

The paper summarised evidence already gathered in this project including an initial research summary from 2015, stakeholder feedback on matters discussed in the research summary and feedback from the 2015 Agenda Consultation.

As a next step, the staff woul update the research summary for the final wording of the Conceptual Framework, any considerations from the narrow-scope project on onerous contracts (cost of fulfilling a contract) and possible problems with IAS 37 Provisions, Contingent Liabilities and Contingent Assets that have emerged or been resolved since 2015.

There were no staff recommendations.

Board discussion

The Board generally agreed that this project should be restarted.

One Board member noted that the staff estimates to bring back recommendations to the Board in Q3 of 2019 and questioned why it would take so long to update the research summary. The staff should only perform supplementary outreach on additional issues that have arisen since the research summary and not reach out on issues where they had already conducted outreach. The staff conceded that the timeline was quite conservative and they would try to accelerate this to Q2 of 2019.

One Board member highlighted that the Board will issue an Exposure Draft (ED) on which costs to include when deciding on whether a contract is onerous and said that any feedback from the consultation on the ED should also be used when looking at costs that should be included in the measurement of provisions. There is a risk that constituents might be confused as to why the Board addresses those issues in different streams, so that should be clarified in any documents issued on this project.

One Board member asked whether the staff would look at any work the IFRS Interpretations Committee had undertaken on IAS 37 and warned to bear in mind that in instances where the Committee had decided that the Standard is clear, it does not necessarily mean that the resulting accounting treatment is the most desirable.

No decisions were made.

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