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IASB publishes proposed amendments to IAS 37 regarding onerous contracts

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13 Dec 2018

The International Accounting Standards Board (IASB) has published an exposure draft 'Onerous Contracts — Cost of Fulfilling a Contract (Proposed amendments to IAS 37)' considering costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. Comments are requested by 15 April 2019.



The IFRS Interpretations Committee received a request to clarify what costs an entity considers in assessing whether a contract is onerous. The Committee’s research revealed that, for some contracts, differing interpretations of the onerous contract requirements in IAS 37 Provisions, Contingent Liabilities and Contingent Assets could have a material effect on entities that enter into those contracts. Consequently, the Committee recommended that the Board clarifies the onerous contract requirements in IAS 37. The Board supported the Committee’s suggestion and has today published an exposure draft of proposed clarifications.


Suggested changes

The changes proposed in ED/2018/2 Onerous Contracts — Cost of Fulfilling a Contract (Proposed amendments to IAS 37)

  • specify that the ‘cost of fulfilling’ a contract in paragraph 68 of IAS 37 comprises the ‘costs that relate directly to the contract’; and
  • provide examples of costs that do, and do not, relate directly to a contract to provide goods or services.

The Board proposes no new requirements for entities to disclose information about onerous contracts.

Comments on the proposed changes are requested by 15 April 2019.


Effective date and transition requirements

The exposure draft does not contain a proposed effective date, which the IASB intends to decide on after the exposure. Early application would be permitted.

Entities already reporting under IFRS would be required to apply the proposed amendments to contracts existing at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated (‘modified retrospective’ approach). There are no specific transition requirements for entities adopting IFRSs for the first time.


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