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IAS 37 Onerous Contracts - Operating Leases and other Executory Contracts

Date recorded:


In December 2003, the IFRIC considered whether it should take onto its agenda the issue of interpreting the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets relating to onerous contracts. The IFRIC had a preliminary discussion on the scope of this issue, the underlying rationale for recognising such a provision and how the provision should be measured.

Decision not to add

December 2003



The IFRIC agreed that this issue should not be taken on as its agenda, but agreed that the points raised in its discussion should be brought to the Board’s attention, including the interaction with the revision of IAS 37 in the convergence project.

Given the limited scope of the IAS 37 convergence project, the Board decided that it should not make fundamental changes to the requirements for onerous contracts.  It also noted that it had two projects on its active agenda (Leasing and Revenue Recognition) that could affect these requirements.  Nonetheless, the Board is considering additional guidance to the existing requirements to make it clear that if a contract becomes onerous as a result of an entity’s own actions, no provision is recognised until that action occurs.

The IASB / FASB joint convergence project on IAS 37 is expected to result in an Exposure Draft being issued by the IASB in the 2nd quarter of 2004.


IFRIC reference: IAS 37

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