In November 2024, the International Accounting Standards Board (the IASB) issued an exposure draft (ED) that proposes amendments to IAS 37 on Provisions, Contingent Liabilities and Contingent Assets. This ED proposes amendments to three aspects:

1.  The present obligation recognition criterion – the amendment clarifies the present obligation criterion and adjusts the timing for recognising certain provisions, especially levies. The amendment aligns the definition of a liability with the IASB’s Conceptual Framework for Financial Reporting. The amendments also replaced the recognition criteria for an obligation event with three distinct conditions: obligation, transfer and past event.
2. The costs to include to measure a provision – IAS 37 requires a provision to be measured based on the best estimate of the expenditure needed to settle the current obligation. The amendments to IAS 37 propose that this expenditure should include costs directly related to the obligation, covering both incremental costs to settle the obligation and an allocation of other costs directly associated with settling the obligation. This amendment aims to ensure that an entity considers the same costs when measuring a provision as those for determining whether a contract is onerous.
3.  Discount rate requirements – the amendment proposes to use a risk-free discount rate to measure a provision, with no other adjustments for, for example, non-performance or own credit risk. The proposed amendment aims to reduce diversity in discount rates used by entities when measuring provisions.

The amendments will ensure that earlier information is available to users about an entity’s present obligations and how they impact future cash flows.

The amendments replace the requirements in IFRIC 6 on Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment and IFRIC 21 on Levies.

Is there any impact locally?

The amendments, once approved by the IASB, will not have any impact on GRAP 19 on Provisions, Contingent Liabilities and Contingent Assets.

Comment on the ED closed in March 2025.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.

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