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Hi sir
I’m a bit confused with this.
Why are we not including cost of relocation , retraining costs etc
Ias says because we include only costs that are directly related to restructuring
Why are they not related ? I mean we wont Incur it if we aren’t restructuringDid you mean to ask me (AA)? Here are some brief notes:
A restructuring can comprise numerous activities, including termination or relocation of a business, a change in management structure and lay-offs. At a high level, the associated costs are recognised when (i) the program is of such scale that it meets the IFRS definition of a restructuring, and (ii) management has an obligation to proceed with the restructuring.
Only INCREMENTAL costs that are directly associated with the restructuring should be included in the provision. IAS 37 prohibits the recognition of a provision for costs associated with ONGOING activities, such as the cost of training or relocating continuing staff. (You could think of it like this – that these costs will reap future benefits – so should be recognised as incurred.)
So basically the costs in a restructuring provision would include redundancy and closure costs – clearly these have no future benefit (which is why it is appropriate to recognise the expense when the criteria are met).
Yes because this was part of procedure question.
And thank you very very much
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