IAS 37 — Provisions, Contingent Liabilities and Contingent Assets (2024)

Overview

IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible obligations and present obligations that are not probable or are not reliably measurable).

A provision shall be recognized when:

1. an entity has a present obligation (legal or constructive) as a result of a past event;
2. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
3. a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, no provision shall be recognized. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, and is discounted where the time value of money is material.

An entity shall not recognize a contingent liability. A contingent liability fails one or more of the conditions above for a provision (i.e. is it a possible obligation, or it is a present obligation but it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability). A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote.

Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized.

History of IAS 37

The following table shows the history of this standard subsequent to the adoption of IFRS in Canada.

Notes

Related Interpretations

• IFRIC 1,Changes in Existing Decommissioning, Restoration and Similar Liabilities
• IFRIC 5,Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds
• IFRIC 6,Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment
• IFRIC 13, Customer Loyalty Programmes
  
• IFRIC 17,Distributions of Non-cash Assets to Owners
• IFRIC21, Levies

Related IFRIC Agenda Rejection Notices

The rejection notices are available in our Deloitte Global section.

• IAS 37 — Climate-related Commitments (November 2023)
• IAS 37 — Measurement of liabilities arising from emission trading schemes (May 2014)
• IFRIC 21 — Identification of a present obligation to pay a levy that is subject to a pro rata activity threshold as well as an annual activity threshold (March 2014)
• IAS 18, IAS 37 and IAS 39 — Regulatory assets and liabilities (November 2012)
• IAS 37 — Inclusion of own credit risk in discount rate (March 2011)
• IAS 37/IAS 38 — Regulatory assets and liabilities (March 2009)
• IAS 37 — Deposits on returnable containers (May 2008)
• IAS 37 — Obligations to repair/maintain another entity’s property, plant and equipment (July 2005)
• IAS 37 — Onerous Contracts - Operating Leases and other Executory Contracts (December 2003)
• IAS 37 — Provisions – examples of constructive obligations (February 2002)
• IAS 37 — Provisions - onerous contracts (February 2002)

AcSB’s IFRS Discussion Group meetings

Amendments under consideration

• Provisions (Possible Amendments to IAS 37)
• Pollutant Pricing Mechanisms