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IAS 37 Provisions, Contingent Liabilities & Contingent Assets defines and specifies the accounting for and disclosure of provisions, contingent liabilities, and contingent assets.

Provisions

A provision is a liability of uncertain timing or amount. The liability may be a legal obligation or a constructive obligation. A constructive obligation arises from the entity’s actions, through which it has indicated to others that it will accept certain responsibilities, and as a result has created an expectation that it will discharge those responsibilities. Examples of provisions may include: warranty obligations; legal or constructive obligations to clean up contaminated land or restore facilities; and obligations caused by a retailer’s policy to make refunds to customers.

An entity recognizes a provision if it is probable that an outflow of cash or other economic resources will be required to settle the provision. If an outflow is not probable, the item is treated as a contingent liability.

A provision is measured at the amount that the entity would rationally pay to settle the obligation at the end of the reporting period or to transfer it to a third party at that time. Risks and uncertainties are taken into account in measuring a provision. A provision is discounted to its present value.

IAS 37 Provisions, Contingent Liabilities & Contingent Assets elaborates on the application of the recognition and measurement requirements for three specific cases:

• Future operating losses—a provision cannot be recognised because there is no obligation at the end of the reporting period;
• An onerous contract gives rise to a provision; and
• A provision for restructuring costs is recognised only when the entity has a constructive obligation because the main features of the detailed restructuring plan have been announced to those affected by it.

IAS 37 Provisions, Contingent Liabilities & Contingent Assets is Copyright: IFRS Foundation

Hierarchy

ID	Name	Level	x
IFRS	International Financial Reporting Standards	0	IFRS
IAS37	IAS 37 Provisions, Contingent Liabilities & Contingent Assets	1	IAS37

Term(s)

ID	Name	Clear	x
IAS19	IAS 19 Employee Benefits		IAS19
CSFP	Statement of Financial Position		CSFP

IAS 37 Provisions, Contingent Liabilities & Contingent Assets International Financial Reporting Standards 10037 1 IAS, IFRS, Standard, Financial, Accounting, Warranty Obligations, Legal Obligations, Constructive Obligations, Provisions IAS 37 defines and specifies the accounting for and disclosure of provisions, contingent liabilities, and contingent assets