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


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​.

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