IAS 37

[saad]

what does IAS 37 mean?

[siddharth]

Hi, it deals with provision. contingency liabilities and assets.

[kamran_bsh]

IAS 37 deals with"Provisions, Contingent Liabilities and Contingent Assets"

SUMMARY OF IAS 37

Objective

The objective of IAS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The key principle established by the Standard is that a provision should be recognised only when there is a liability i.e. a present obligation resulting from past events. The Standard thus aims to ensure that only genuine obligations are dealt with in the financial statements - planned future expenditure, even where authorised by the board of directors or equivalent governing body, is excluded from recognition.

Scope
IAS 37 excludes obligations and contingencies arising from: [IAS 37.1]

-financial instruments carried at fair value (but IAS 37 does apply to financial instruments carried at amortised cost)
-non-onerous executory contracts
-insurance company policy liabilities (but IAS 37 does apply to non-policy-related liabilities of an insurance company)
-items covered by another IAS. For example, IAS 11, Construction Contracts, applies to obligations arising under such contracts; IAS 12, Income Taxes, applies to obligations for current or deferred income taxes; IAS 17, Leases, applies to lease obligations; and IAS 19, Employee Benefits, applies to pension and other employee benefit obligations.
Key Definitions [IAS 37.10]
Provision: A liability of uncertain timing or amount.
Liability:
Present obligation as a result of past events
Settlement is expected to result in an outflow of resources (payment)
Contingent liability:
a possible obligation depending on whether some uncertain future event occurs, or
a present obligation but payment is not probable or the amount cannot be measured reliably
Contingent asset:
a possible asset that arises from past events, and
whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.