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im aware sir that an onerous contract is one which is loss making, but i would like guidance on a particular situation,
a company has announced to discontinue operations and has booked a provision for all remaining unexpired lease payments of 3 the remaining years, now is booking all of the unexpired lease payments in one go as provision correct treatment? and furthermore could we call these unexpired lease payments as an onerous contract??
Yes and, again, yes
At the date of the decision to discontinue the obligation is determined so it is correct to make the provision (I assume that this is an operating lease and not a finance lease)
And, yes, this is an onerous contract. The only way out of this contract will involve an outflow of economic resource with no corresponding mitigating inflow
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