IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 37 sets requirements for recognising and measuring provisions and for disclosing contingent liabilities and contingent assets. A provision needs a present obligation from a past event, a probable outflow of resources and a reliable estimate. A possible obligation is assessed for contingent-liability disclosure instead. A contingent asset is not recognised while contingent; probable inflows are disclosed, and virtually certain inflows qualify for recognition.
Worked example
Completed sales create a present warranty obligation. If settlement outflows are probable and reliably estimated at $500, recognise a $500 provision.
Common mistake
A future operating loss or management’s intention to spend money is not, by itself, a present obligation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: IAS 37