By using our website, you agree to the use of our cookies.
By using our website, you agree to the use of our cookies.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

International Accounting Standard 37

Overview of IAS 37

  • Issued: in 1998; followed by amendments
  • Effective date: 1 January 1999
  • What it does:
    • It contains definitions of a provision, contingent liability, contingent asset, etc.
    • It gives guidance on distinguishing provisions from other liabilities and on relationship between provisions and contingent liabilities.
    • It deals with recognition of both provisions and contingencies.
    • Provision shall be recognized when the following 3 conditions are met:
      1. An entity has a present obligation as a result of past event;
      2. Outflow of economic benefits to settle the obligation is probable; and
      3. Reliable estimate of the amount of obligation can be made.
    • Contingent liabilities and contingent assets shall not be recognized.
    • IAS 37 sets rules for measurement of provisions and discusses several factors to take into account in reaching the best estimate of provision:
      • Risk and uncertainties,
      • Present value,
      • Future events,
      • Expected disposals of assets.
    • Standard also deals with reimbursements of provisions by another party, changes in provisions and use of provisions.
    • It establishes application rules for recognition and measurement of 3 specific cases:
      1. Future operating losses;
      2. Onerous contracts; and
      3. Restructuring.
    • Number of disclosures is required.
    • In its appendices, standard summarizes main requirements of the standard in a transparent table, decision tree, examples of recognition and disclosures.

Articles about IAS 37

Questions and Answers

Other Resources

  • IFRS Kit - learn IFRS in 130+ videos, 140+ excel case studies, quizzes, certificates
  • IFRS Refresher Modules - interactive text-based training in individual IFRS with the feedback from real tutors
  • IFRS Enabler - systematical interactive IFRS training for corporate teams
  • my Helpline - get answers to your specific IFRS and other questions from more than 50 top consultants + fully searchable IFRS database as a bonus

CLICK HERE to see a complete catalogue of our courses.