Provisions - Targeted Improvements to IAS 37
- Active
- Exposure draft consultation
- Rasmus Sommer
Description
Project History
In January 2020, the IASB decided to add a standard-setting project to its work plan, with the objective of making three following targeted improvements to IAS 37:
- aligning the liability definition and requirements for identifying liabilities in IAS 37 with the Conceptual Framework for Financial Reporting;
- clarifying which costs to include in the measure of a provision; and
- specifying whether the rate at which an entity discounts a provision should reflect the entity’s own credit risk.
The IASB issued an Exposure Draft on 12 November 2024.
EFRAG's Draft Comment Letter (DCL)
EFRAG issued its Draft Comment Letter on 20 December 2024 and asked for comments by 25 February 2025. However, to fully understand the implications of some of the proposals and allow more in-depth analysis of the effects of the proposed changes, EFRAG asked the IASB to extend the comment period on the Exposure Draft. At its January 2025 meeting, the IASB considered the request but decided to keep 120-day comment period.
The DCL includes questions to constituents on the most significant aspects of the proposals which EFRAG might need to consider further before finalising its comment letter to the IASB on the ED.
In the DCL, EFRAG’s tentative view is that the proposals aiming at clarifying the current requirements on when an entity has a present obligation as a result of a past event are overall useful. However, EFRAG acknowledges that there are arguments both in favour and against the proposed requirements of the ED resulting in some provisions being recognised earlier than currently done.
EFRAG tentatively supports the proposal to specify that the costs to settle a present obligation comprise the costs that relate directly to that obligation.
Overall, EFRAG generally supports the IASB’s efforts to reduce diversity in practice by specifying that the rate an entity uses to discount the future expenditure to its present value is a risk-free rate and should not include non-performance risk.
EFRAG makes further suggestions to enhance the clarity of the proposals and comments on the proposed transition requirements, disclosures for subsidiaries without public accountability and the proposed amendments to the implementation guidance of IAS 37.
To gather additional input on the proposals, EFRAG launched two surveys, one covering various aspects of the ED [survey in PDF format], mainly addressed to preparers and auditors of financial statements, and another one focusing on when to recognise a levy provision [survey in PDF format], addressed to users of financial statements.
Publications open for comments
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19/12/2024 - EFRAG’s Draft Comment Letter on the IASB ED Provisions—Targeted Improvements
EFRAG has issued its Draft Comment Letter on the IASB ED Provisions—Targeted Improvements (Proposed amendments to IAS 37).
Documents
Project news
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18/02/2025 - When Should a Levy Provision Be Recognised? EFRAG Seeks Views from Financial Statements Users
Have five minutes? Share your views on when to recognise a levy provision for the most useful reporting. Survey closes on 28 February 2025.
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17/02/2025 - EFRAG Seeks Stakeholders’ Views on Aspects of the Proposed Amendments to IAS 37
Share your input on the IASB's proposed changes by 27 February via the new dedicated survey.
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17/12/2024 - EFRAG requests an extension of the comment period on the Exposure Draft Provisions -Targeted Improvements
EFRAG has requested the IASB to extend the comment period on the Exposure Draft Provisions -Targeted Improvements (ED) to 12 May 2025.
