The International Accounting Standards Board (IASB) recently issued an Exposure Draft, “Onerous Contracts – Cost of Fulfilling a Contract (Proposed amendments to IAS 37)” available on the IASB website. The proposed amendments specify in IAS 37, Provisions, Contingent Liabilities and Contingent Assets that, in assessing whether a contract is onerous, entities should include all costs that relate directly to the contract, not only the incremental costs. This clarification could particularly affect construction, manufacturing and service entities.
The IASB’s Exposure Draft includes a Basis for Conclusions that is not part of this Exposure Draft. The Basis for Conclusions may provide useful information to stakeholders.