Costs Considered in Assessing Whether a Contract is Onerous (Amendments to IAS 37)
- Endorsement consultation
- Robert Stojek, Almudena Alcala
The objective of this IASB project is to clarify the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets regarding the assessment of whether a contract is onerous.
On 13 December 2018, the IASB published an exposure draft ED/2018/2 Onerous Contracts - Cost of Fulfilling a Contract (the ED). In the ED, the IASB proposes that the costs of fulfilling a contract are all the costs that relate directly to the contract rather than limiting the costs of fulfilling a contract to the incremental costs related to the contract. Moreover, the IASB proposes to add the examples of costs the do, and do not, relate directly to a contract. The IASB requested comments by 15 April 2019.
In response to the ED, on 25 April 2019, EFRAG published its comment letter where EFRAG welcomed the IASB’s efforts to clarify the requirements in IAS 37 regarding the assessment of whether, in a contract, the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. However, EFRAG noted that the proposed amendments would affect the onerous assessment not only for long-term construction contracts previously in the scope of IAS 11 but for all contracts in the scope of IAS 37. Consequently, EFRAG encouraged the IASB to further assess the expected impact of the proposals.
The feedback statement summarising EFRAG's response to the constituents' comments is available in the Documents section, below.
On 14 may 2020, the IASB published a package of narrow-scope amendments to IFRS Standards which included the amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Publications open for comments
24/06/2020 - EFRAG requests comments on its Draft Endorsement Advice on Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
EFRAG is consulting on its assessment of Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) against the technical criteria in the EU and on its assessment of whether the Amendments are conducive to the European public good. Comments are requested by 7 September 2020.
25/04/2019 - EFRAG’s Comment Letter and Feedback Statement on IASB's Exposure Draft ED/2018/2 Onerous Contracts - Cost of Fulfilling a Contract (Proposed Amendments to IAS 37)
EFRAG has published its comment letter and its feedback statement in response to the IASB's Exposure Draft ED/2018/2 Onerous Contracts - Cost of Fulfilling a Contract (Proposed Amendments to IAS 37).
25/01/2019 - EFRAG's Draft Comment Letter on the IASB ED/2018/2 Onerous Contracts - Cost of Fulfilling a Contract - Proposed amendments to IAS 37
EFRAG has published its draft comment letter in response to the IASB's Exposure Draft 2018/2 Onerous Contracts - Cost of Fulfilling a Contract - Proposed amendments to IAS 37 (the 'ED') and seeks constituents' views on the proposals. Comments on the draft comment letter are requested by 5 April 2019, by close of business.