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  • AASB Standard AASB 137 August 2015

    Provisions, Contingent Liabilities and Contingent Assets

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 2 COPYRIGHT

    Obtaining a copy of this Accounting Standard

    This Standard is available on the AASB website: www.aasb.gov.au.

    Australian Accounting Standards Board

    PO Box 204

    Collins Street West

    Victoria 8007

    AUSTRALIA

    Phone: (03) 9617 7637

    E-mail: publications@aasb.gov.au

    Website: www.aasb.gov.au

    Other enquiries

    Phone: (03) 9617 7600

    E-mail: standard@aasb.gov.au

    COPYRIGHT

    Commonwealth of Australia 2015

    This AASB Standard contains IFRS Foundation copyright material. Reproduction within Australia in unaltered form

    (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an

    acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes

    within Australia should be addressed to The Director of Finance and Administration, Australian Accounting Standards

    Board, PO Box 204, Collins Street West, Victoria 8007.

    All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form

    (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for

    authorisation to reproduce for commercial purposes outside Australia should be addressed to the IFRS Foundation at

    www.ifrs.org.

    ISSN 1036-4803

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 3 CONTENTS

    Contents

    COMPARISON WITH IAS 37

    ACCOUNTING STANDARD

    AASB 137 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

    from paragraph

    OBJECTIVE

    SCOPE 1

    DEFINITIONS 10

    Provisions and other liabilities 11

    Relationship between provisions and contingent liabilities 12

    RECOGNITION

    Provisions 14

    Present obligation 15

    Past event 17

    Probable outflow of resources embodying economic benefits 23

    Reliable estimate of the obligation 25

    Recognition of liabilities arising from local government and government existing public policies,

    budget policies, election promises or statements of intent Aus26.1

    Contingent liabilities 27

    Contingent assets 31

    MEASUREMENT

    Best estimate 36

    Risks and uncertainties 42

    Present value 45

    Future events 48

    Expected disposal of assets 51

    REIMBURSEMENTS 53

    CHANGES IN PROVISIONS 59

    USE OF PROVISIONS 61

    APPLICATION OF THE RECOGNITION AND MEASUREMENT RULES

    Future operating losses 63

    Onerous contracts 66

    Restructuring 70

    DISCLOSURE 84

    TRANSITIONAL PROVISIONS 93

    COMMENCEMENT OF THE LEGISLATIVE INSTRUMENT Aus94.1

    WITHDRAWAL OF AASB PRONOUNCEMENTS Aus94.2

    EFFECTIVE DATE 95

    APPENDIX

    A Australian reduced disclosure requirements

    IMPLEMENTATION GUIDANCE

    A Tables Provisions, contingent liabilities, contingent assets and reimbursements

    B Decision tree

    C Examples: recognition

    D Examples: disclosures

    DELETED IAS 37 TEXT

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 4 CONTENTS

    Australian Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets is set out in

    paragraphs 1 101 and Appendix A. All the paragraphs have equal authority. Paragraphs in bold type state the main

    principles. AASB 137 is to be read in the context of other Australian Accounting Standards, including AASB 1048

    Interpretation of Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application

    of Australian Accounting Standards. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in

    Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 5 COMPARISON

    Comparison with IAS 37

    AASB 137 Provisions, Contingent Liabilities and Contingent Assets incorporates IAS 37 Provisions, Contingent

    Liabilities and Contingent Assets issued by the International Accounting Standards Board (IASB). Australian-specific

    paragraphs (which are not included in IAS 37) are identified with the prefix Aus. Paragraphs that apply only to not-

    for-profit entities begin by identifying their limited applicability.

    Tier 1

    For-profit entities complying with AASB 137 also comply with IAS 37.

    Not-for-profit entities compliance with IAS 37 will depend on whether any Aus paragraphs that specifically apply

    to not-for-profit entities provide additional guidance or contain applicable requirements that are inconsistent with

    IAS 37.

    Tier 2

    Entities preparing general purpose financial statements under Australian Accounting Standards Reduced Disclosure

    Requirements (Tier 2) will not be in compliance with IFRSs.

    AASB 1053 Application of Tiers of Australian Accounting Standards explains the two tiers of reporting requirements.

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 6 STANDARD

    Accounting Standard AASB 137

    The Australian Accounting Standards Board makes Accounting Standard AASB 137 Provisions, Contingent

    Liabilities and Contingent Assets under section 334 of the Corporations Act 2001.

    Kris Peach

    Dated 14 August 2015 Chair AASB

    Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets

    Objective

    The objective of this Standard 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 enable users to understand their nature, timing and amount.

    Scope

    1 This Standard shall be applied by all entities in accounting for provisions, contingent liabilities and

    contingent assets, except:

    (a) those resulting from executory contracts, except where the contract is onerous; and

    (b) [deleted]

    (c) those covered by another Standard.

    2 This Standard does not apply to financial instruments (including guarantees) that are within the scope of

    AASB 9 Financial Instruments.

    3 Executory contracts are contracts under which neither party has performed any of its obligations or both

    parties have partially performed their obligations to an equal extent. This Standard does not apply to

    executory contracts unless they are onerous.

    4 [Deleted]

    5 When another Standard deals with a specific type of provision, contingent liability or contingent asset, an

    entity applies that Standard instead of this Standard. For example, some types of provisions are addressed in

    Standards on:

    (a) [deleted]

    (b) income taxes (see AASB 112 Income Taxes);

    (c) leases (see AASB 117 Leases). However, as AASB 117 contains no specific requirements to deal

    with operating leases that have become onerous, this Standard applies to such cases;

    (d) employee benefits (see AASB 119 Employee Benefits);

    (e) insurance contracts (see AASB 4 Insurance Contracts, AASB 1023 General Insurance

    Contracts, and AASB 1038 Life Insurance Contracts). However, this Standard applies to

    provisions, contingent liabilities and contingent assets of an insurer, other than those arising from

    its contractual obligations and rights under insurance contracts within the scopes of AASB 4,

    AASB 1023 or AASB 1038;

    (f) contingent consideration of an acquirer in a business combination (see AASB 3 Business

    Combinations); and

    (g) revenue from contracts with customers (see AASB 15 Revenue from Contracts with Customers).

    However, as AASB 15 contains no specific requirements to address contracts with customers that

    are, or have become, onerous, this Standard applies to such cases.

    6 [Deleted]

    Federal Register of Legislative Instruments F2015L01607

  • AASB 137 7 STANDARD

    7 This Standard defines provisions as liabilities of uncertain timing or amount. In some countries the term

    provision is also used in the context of items such as depreciation, impairment of assets and doubtful

    debts: these are adjustments to the carrying amounts of assets and are not addressed in this Standard.

    8 Other Standards specify whether expenditures are treated as assets or as expenses. These issues are not

    addressed in this Standard. Accordingly, this Standard neither prohibits nor requires capitalisation of the

    costs recognised when a provision is made.

    9 This Standard applies to provisions for restructurings (including discontinued operations). When a

    restructuring meets the definition of a discontinued operation, additional disclosures may be required by

    AASB 5 Non-current Assets Held for Sale and Discontinued Operations.

    Definitions

    10 The following terms are used in this Standard with the meanings specified:

    A provision is a liability of uncertain timing or amount.

    A liability is a present obligation of the entity arising from past events, the settlement of which is

    expected to result in an outflow from the entity of resources embodying economic benefits.

    An obligating event is an event that creates a legal or constructive obligation that results in an entity