Exposure Draft IASB/ED/2024/8 Provisions—Targeted Improvements (Proposed amendments to IAS 37)

The International Accounting Standards Board (IASB) has published for public comment an Exposure Draft which is proposing targeted improvements to three aspects of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as below:

(1) Amendments to the present obligation recognition criterion

The proposed amendments to the present obligation recognition criterion, amongst others, include:

(a) updating the definition of a liability in IAS 37 and the wording of the present obligation recognition criterion to align them with the definition of a liability in the Conceptual Framework;

(b) amending the requirements that support the present obligation recognition criterion, drawing on concepts from the Conceptual Framework; and

(c) withdrawing IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment and the requirements in IFRIC 21 Levies which are inconsistent with the Exposure Draft; and replacing it with the illustrative examples in the Guidance on implementing IAS 37.

(2) Amendments relating to the costs to include in measuring a provision

The IASB proposes to specify that the costs to measure a provision comprises the costs that relate directly to the obligation, which include both the incremental costs of settling that obligation and an allocation of other costs that relate directly to settling obligations of that type.

(3) Amendments to the discount rate requirements

The IASB proposes to specify that an entity discounts a provision using a risk-free rate—that is, a rate that excludes non-performance risk. The IASB also requires an entity to disclose the discount rates it has used and the approach it has used to determine those rates.

The IASB is also proposing amendments to the Guidance on implementing IAS 37 which would update the guidance on applying the present obligation recognition criterion to reflect the proposed amendments to the requirements.

Invitation to comment

The Exposure Draft is open for comment until 12 February 2025.

You may provide your comments via email to us at technical@masb.org.my. 

Click here to submit your comments.