Legal obligation
A legal obligation is an obligation arising from a contract, legislation or other operation of law. Under IAS 37 it can be relevant to identifying a present obligation for a provision, alongside constructive obligations. Recognition also requires the applicable outflow and measurement criteria.
Worked example
A contract requires a business to repair defects under a warranty; management evaluates the present obligation and estimated outflow.
Common mistake
A legal obligation is not automatically a recognised provision without considering all recognition and measurement requirements.
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 |