Constructive obligation
A constructive obligation arises when an entity’s established pattern of past practice, published policies or sufficiently specific current statement has created a valid expectation in other parties that it will accept particular responsibilities. IAS 37 applies this concept when assessing whether a present obligation exists.
Worked example
A retailer’s long-standing public refund practice creates a valid expectation that qualifying customers will receive refunds, even where no legal requirement exists.
Common mistake
A general moral intention or future plan alone does not automatically create a constructive obligation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AA | Supporting | September 2026–June 2027 |
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |