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IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 37 Provisions, Contingent Liabilities and Contingent Assets sets the recognition criteria and measurement bases to be applied to provisions, contingent liabilities and contingent assets.

Published September 1998. Effective 1 July 1999.

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IAS 37 requires that a provision is only recognised where:

  • There is a legal or constructive present obligation as a result of a past event, and
  • Payment is probable, and
  • The amount can be reliably estimated.

The amount of the provision should be the best estimate of the amount required to settle the obligation at the reporting date.

Contingent liabilities are not recognised, but are disclosed unless the possibility of an outflow of economic resources is remote.

Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

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*Not EU endorsed as at 26 November 2015. Read more on EU Endorsement.

The following interpretations refer to IAS 37

UK reduced disclosures

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Amendments to the standard

IAS 37 allows the non-disclosure of information about provisions and contingent liabilities where disclosure is expected to prejudice the position of an entity in a dispute. In these cases IAS 37 requires that the general nature of the dispute is disclosed. From 1 January 2016, UK companies applying FRS 101 are required to provide additional specific numeric and narrative disclosures.

Disclosure exemptions

There are no disclosure exemptions from IAS 37.

Current proposals

  1. The IASB issued a proposed new standard on Insurance Contracts in July 2010. A revised exposure draft was issued in June 2013. When this standard is finalised, it intends to amend IAS 37 to delete an example which illustrates existing requirements for financial guarantee contracts. This would be replaced with an example illustrating the IAS 37 requirements for other guarantee obligations that would continue to be within the scope of IAS 37. Deliberations are currently ongoing and a final standard is not expected to be issued during 2015.

  2. ED/2010/9 Leases was issued in August 2010. The revised ED/2013/6 Leases was issued in May 2013. It proposes fundamental changes to the way in which leases are accounted for and would result in amendments to IAS 37 to clarify which leases fall within the scope of that standard. Example 8 in respect of an onerous contract would also be deleted from the appendix to IAS 37. A final standard is currently being drafted and is expected in the first half of 2016.

This page was last updated 26 November 2015