IASB Proposes Changes to IAS 37

The International Accounting Standards Board (IASB) has proposed targeted amendments to IAS 37 (Provisions, Contingent Liabilities, and Contingent Assets) to improve clarity on how companies recognise and measure provisions. The goal is to increase consistency, transparency, and comparability in financial reporting.

Key Proposed Changes:

• New Definition of a Liability – Aligning IAS 37’s definition with the Conceptual Framework for Financial Reporting.

• Recognition Criteria – Provides clearer guidance on when a company has a present obligation requiring a provision.

• Measurement Adjustments:

  • Companies to include both incremental and allocated costs when estimating provision amounts.

  • Discount rate change – Provisions to be measured using risk-free discount rates, removing adjustments for non-performance risk.
    Withdrawal of IFRIC 21 (Levies) – Updates how companies recognise liabilities for government-imposed levies, leading to earlier recognition in some cases.

What Entities Will Be Most Affected?

Companies most affected will be those with large long-term decommissioning obligations (e.g., environmental cleanup, asset retirement) and businesses subject to levies, government-imposed charges, or penalty-based regulatory requirements.

Call for Input

Follow the prescribed process to submit your input by 12 March 2025 and help shape the final standard, ensuring it remains practical and relevant for financial reporting.