Project direction (Agenda Paper 22)

The IASB made tentative decisions on possible amendments to the measurement requirements:

• In July 2023, it tentatively decided that the expenditure required to settle the entity’s present obligation should be the costs that relate directly to settling that obligation, which consist of both:
  • The incremental costs of settling the obligation
  • An allocation of other costs that relate directly to settling obligations of that type.
• In November 2023, it tentatively decided that an entity should discount the estimated future expenditure at a rate that reflects the time value of money— represented by a risk-free rate—with no adjustment for non-performance risk

The IASB has not yet made decisions on amendments to the requirements supporting the present obligation recognition criterion. However, at its meeting in April 2023, the IASB discussed detailed staff suggestions for possible amendments, including illustrative drafting. The staff papers for that meeting identified only one major open issue—whether the amendments should include application requirements for charges triggered if a measure of an entity’s performance (for example its revenue or its greenhouse gas emissions) exceeds a specified threshold.

Feedback from stakeholder groups has been generally positive and provided useful suggestions for improving the structure and drafting of the amended requirements. Furthermore, stakeholders have expressed consistent views on requirements for charges triggered by exceeding a threshold. Most stakeholders commenting on this matter agreed that the IASB should add to IAS 37 application requirements for such charges and thought that liabilities for the charges could arise as progress is made towards the threshold, not only after the threshold has been met.

On the basis of the progress the IASB has made on this project, the staff thinks it can now start to make plans for publishing proposals for wider comment.

Staff recommendation

The staff recommended that the IASB continue developing proposed amendments to IAS 37 and make the next project milestone the publication of an exposure draft for stakeholder comment.

IASB discussion

There was no significant discussion. All of the 14 IASB members voted in favour of the staff recommendation.