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.
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 included 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.
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.
EFRAG's Comment Letter (FCL)
EFRAG considered the input received in response to its DCL and from outreach activities and submitted its
Comment Letter to the IASB on 1 April 2025.In its comment letter EFRAG assessed that while the proposals related to the present obligation criterion would clarify the requirements for some types of provisions, they created less clear guidance for others. EFRAG also found that the proposals would increase the use of judgement and therefore would not reduce compliance cost. One of the effects of amending the present obligation recognition criterion would be the withdrawal of IFRIC 21. EFRAG appreciated this but noted that the ED did not (completely) address the concerns previously expressed about IFRIC 21.
EFRAG supported the proposals targeting the measurement of a provision. That is, clarifying the expenditure required to settle an obligation and specifying that the discount rate used to discount future expenditure is a risk-free rate excluding non-performance risk. However, EFRAG had several observations and recommendations, including the need for additional guidance and clarification of certain aspects of these proposals.
EFRAG considered that the IASB could be able to finalise the amendments related to measurement faster than those related to the present obligation recognition criterion.
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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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).
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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.
