Provisions—Targeted Improvements

The IASB met on 20 June 2024 to discuss proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, including:

• sweep issues arising from its previous tentative decisions (Agenda Paper 22A); and
• proposed transition requirements (Agenda Paper 22B).

The IASB also discussed an analysis of the costs and benefits (effects) of the proposed amendments and a review of the due process the IASB followed to develop those amendments (Agenda Paper 22C).

Sweep issues (Agenda Paper 22A)

The IASB tentatively decided to propose in an exposure draft:

1. to retain the scope of IAS 37, instead of widening it to include levies whose timing and amount are certain;
2. to add to IFRS 19 Subsidiaries without Public Accountability: Disclosures a requirement for an entity to disclose the discount rate(s) used in measuring a provision, but not to add to IFRS 19 a requirement for an entity to disclose the approach used to determine the rate(s); and
3. to delete paragraphs 21A–21C from IFRS 3 Business Combinations, thereby removing the exception to the recognition principle in IFRS 3 that would become redundant as a result of the proposed amendments to IAS 37.

All 14 IASB members agreed with these decisions.

Transition requirements (Agenda Paper 22B)

The IASB tentatively decided to propose in the exposure draft that an entity apply the proposed amendments retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with two exceptions.

The first exception would apply to the proposed amendment to the discount rate requirements affecting provisions for asset decommissioning, restoration or similar costs that are added to the cost of the related asset. The exception would permit an entity to apply a simplified retrospective approach, whereby in the year of transition the entity would:

1. apply the amended requirements in IAS 37 to restate the provision at the start of the first period for which it provides comparative information; and
2. apportion the amount by which it adjusts the provision at that date between the related asset and retained earnings:
   1. assuming the current discount rate(s) and estimates of cash flows used in measuring the provision have not changed since the provision was first recognised; and
   2. using current estimates of the useful life of the related asset.

The second exception would apply to the proposed amendment specifying the costs an entity would include in measuring a provision. The exception would require an entity to apply the proposed amendment:

1. only to obligations that exist on, or arise after, the beginning of the annual reporting period in which the entity first applies that amendment.
2. without restating comparative information. Instead, the entity would recognise the cumulative effect of applying the amendment as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application.

Nine of 14 IASB members agreed with this decision.

The IASB tentatively decided to propose in the exposure draft to make no amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards as a result of the amendments proposed in this project.

All 14 IASB members agreed with this decision.

Effects analysis and review of due process (Agenda Paper 22C)

The IASB set a 120-day comment period for the exposure draft.

All 14 IASB members agreed with this decision.

All 14 IASB members confirmed they were satisfied the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the exposure draft.

No IASB member indicated an intention to dissent from the proposals in the exposure draft.