Obligating event
An obligating event is an event that creates a legal or constructive obligation leaving the entity no realistic alternative to settling it. Under IAS 37, it is relevant to determining whether a present obligation exists at the reporting date; recognition also depends on other criteria.
Worked example
An entity gives a warranty on products sold before year end, creating an obligation that management evaluates for a provision.
Common mistake
A general intention to spend in the future does not automatically create a present 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 |