IASB Exposure Draft ED/2024/8 – proposed amendments to IAS 37 (Provisions)

The IASB have published the Exposure Draft (ED/2024/8) “Provisions – targeted improvements (proposed amendments to IAS 37)”. Further, the IASB have published Guidance on implementing and Basis for Conclusions as accompanying documents.

The draft proposes improvements to the following aspects:

1. one of the criteria for recognising a provision—the requirement for the entity to have a present obligation as a result of a past event (the present obligation recognition criterion); as well as
2. two aspects of the requirements for measuring a provision—those relating to (i) the costs an entity includes in estimating the future expenditure required to settle its present obligation; and (ii) the rate an entity uses to discount that future expenditure to its present value.

Further, the IASB proposed to withdraw IFRIC 6 and IFRIC 21 by replacing them with illustrative examples in IAS 37.

All proposals aim at clarifying certain requirements, thereby answering questions from stakeholders, and at potentially changing the timing of recognition of some provisions. This need for clarification results from a new definition (and its supporting concepts) of a liability, which has been developed during the revision of the IFRS Conceptual Framework in 2018.

Comments are to be received by 12 March 2025.