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Costs Considered in Assessing Whether a Contract is Onerous (Amendments to IAS 37)


​​In March 2018 the IASB; issued a comprehensive set of concepts for financial reporting, the revised Conceptual Framework for Financial Reporting (Conceptual Framework), replacing the previous version of the Conceptual Framework issued in 2010 and proposed to amend the definitions of assets and liabilities.

The objective of this project is to align the definition of liabilities in IAS 37 Provisions, Contingent Liabilities and Contingent Assets with the Conceptual Framework and to respectively amend the assessment of whether a contract is onerous. The amendments will:

  1. specify that the 'cost of fulfilling' a contract in paragraph 68 of IAS 37 comprises the 'costs that relate directly to the contract';
  2. provide examples of costs that do, and do not, relate directly to a contract to provide goods or services;
  3. make no new requirements for entities to disclose information about onerous contracts;
  4. make specific transition requirements for entities already reporting using IFRS Standards. Such entities would be required to apply a 'modified retrospective' approach whereby they would apply the proposed amendments to contracts existing at the date of initial application - the beginning of the annual reporting period in which the entity first applies the amendments; and
  5. make no specific transition requirements for entities adopting IFRS Standards for the first time.

An Exposure Draft of the Amendments is expected in Q4 2018​.

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