Objective

IAS 37 prescribes the accounting and disclosure for all provisions, contingent liabilities and contingent assets, except for those listed below.

Scope

The following are exceptions:

• those financial instruments carried at fair value (see IAS 39);

• executory contracts (neither party performed nor both partially performed), except where onerous;

• insurance enterprises from contracts with policyholders (see IFRS 4);

• those covered by another IAS, e.g. IAS 11, 12, 17, 19, nor any revenue covered by IAS 18;

• reduction in asset values e.g. depreciation, doubtful debts.

The objective of IAS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets, and that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount.

Restructuring provisions are included in IAS 37, but additional disclosures may be required by IFRS 5 on discontinuing operations.

Key Definitions

Provision: a liability of uncertain timing or amount.

Legal obligation: an obligation that derives from a contract, legislation or other operation of law.

Constructive obligation: an obligation that derives from an enterprise's actions where:

• by an established pattern of past practice, published policies or a sufficiently specific current statement, the enterprise has indicated to other parties that it will accept certain responsibilities; and

• as a result, the enterprise has created a valid expectation on the part of those parties that it will discharge those responsibilities.