The International Accounting Standards Board (IASB) has released a consultation seeking to enhance the requirements for recognising and measuring provisions on company balance sheets.
Provisions, which represent liabilities of uncertain timing or amount, are said to be required for assessing a company’s future financial position and cash flows.
Investors are demanding transparent and comparable information about companies’ provisions.
In response, the IASB’s targeted improvements are expected to help companies apply the requirements more consistently, providing investors with more useful information.
The proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets seek to clarify the criteria for recognising provisions and improve the guidance on how to measure them.
Additionally, the change would also require companies to disclose more information about the measurement.
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By GlobalDataThe proposals are relevant for companies with long-term asset decommissioning obligations or those facing levies and similar government-imposed charges.
IASB chair Andreas Barckow said: “Our proposals clarify the accounting requirements for provisions, helping companies provide better information for investors.”
The proposed amendments to the present obligation recognition criterion include updating the definition of a liability in IAS 37 to align with the Conceptual Framework.
The amendments will incorporate concepts from the Conceptual Framework, withdraw IFRIC 6 on waste electrical equipment liabilities, and replace it with an illustrative example in the IAS 37 implementation guidance.
Other amendments to the Guidance on implementing IAS 37 will also be included.
The proposed amendments to the present obligation recognition criterion would have widespread applicability.
Last year, the IASB decided to finalise amendments to IAS 12 Income Taxes following Pillar Two model rules published by the OECD.
