IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' addresses the accounting for provisions, contingent liabilities, and

contingent assets. It provides guidance on when to recognize provisions, measuring their amounts, and the disclosures required for contingent liabilities and assets. The standard aims to ensure that an entity recognizes a liability in its financial statements when it has a present obligation resulting from past events and that it can reliably estimate the amount of the obligation.

Scope
IAS 37 must be applied (according to amendments published up to March 31, 2004) by all entities
for the accounting of provisions, contingent liabilities, and contingent assets, except for:

those resulting from "contracts not (fully) executed" except in cases where it is a contract
deficit

those covered by another standard.

IAS 37 does not apply to financial instruments within the scope of IAS 39.
Financial instruments: accounting and evaluation

Definitions
A provision is a liability whose due date or amount is uncertain. A liability is an obligation.
current of the company resulting from past events and whose settlement should translate into
the company through an outflow of resources representing economic benefits.

A potential liability is:

a potential obligation resulting from past events, the existence of which will only be confirmed
by the occurrence (or non-occurrence) of one or more uncertain future events that are not
totally under the control of the company;
or

a current obligation arising from past events but not recognized because:
It is unlikely that a release of resources representative of economic benefits will be
necessary to extinguish the obligation;
or because
the amount of the obligation cannot be assessed with sufficient reliability.
A contingent asset is a potential asset resulting from past events and whose existence will be
confirmed only by the occurrence (or non-occurrence) of one or more uncertain future events that are not
not entirely under the control of the company.

Accounting
A provision must be recognized when:

the company has a current obligation (legal or implicit) resulting from a past event;

it is likely that a release of resources representative of economic benefits will be

necessary to settle the obligation;

and
the amount of the obligation can be estimated reliably.
If these conditions are not met, no provision should be recognized.

The amount recorded as a provision must be the best estimate of the expense required for the
settlement of the current obligation at the closing date. The risks and uncertainties that affect
Inevitably, many events and circumstances must be taken into account to achieve
the best estimate of a provision. A provision should only be used for expenses for
which she was originally accounted for.

Current obligation
In rare cases, the existence of a current obligation is not clearly evident. In these cases, a
A past event is considered to create a current obligation if, taking into account all indications
available, it is more likely than unlikely that a current obligation exists on the closing date.

Potential liabilities
A company should not recognize a contingent liability. However, it gives rise to a disclosure.
in annex.
Potential assets
A company should not recognize a contingent asset. A brief description of the nature of
Potential assets are provided in the appendix when an entry of economic benefits is likely.

Current value
When the effect of the time value of money is significant, the amount of the provision must be the
current value of the expected expenses that one thinks necessary to settle the obligation.

The discount rate must be a pre-tax rate reflecting current valuations by the
market of the time value of money and specific risks associated with this liability. The discount rate does not
must not reflect the risks for which the estimates of future cash flows have been adjusted.

When the provisions are updated, the carrying amount of the provision increases each time.
exercise to reflect the passage of time. This increase is accounted as expenses
financial.

Future events
Future events that may affect the amount needed to extinguish a liability
must be included in the amount of the provision when there are objective indications
sufficient indicating that these events will occur.

The profits resulting from the expected exit of assets should not be considered in the evaluation.
from a provision. Instead, the company recognizes profits on expected asset outflows.
date specified by the standard dealing with the concerned assets.

Refunds
When it is expected that all or part of the expense necessary for the settlement of a provision will be
reimbursed by another party, the reimbursement must be accounted for if, and only if,
the company is almost certain to receive this refund if it fulfills its obligation.
reimbursement must be treated as a separate asset. The amount recognized for
Reimbursement must not exceed the amount of the provision.

In the income statement, the expense corresponding to a provision can be presented net of
amount recorded for a reimbursement.

Changes affecting provisions

Provisions must be reviewed at each closing date and adjusted to reflect the best
estimation as of this date. If a release of resources representative of economic benefits
necessary to settle the obligation is no longer likely, the provision must be reversed.
When the provisions are updated, the carrying amount of the provision increases each time
exercise to reflect the passage of time. This increase is recorded as expenses
financial.

Application of accounting and evaluation rules

Provisions should not be recognized as future operating losses.
If a company has a contract that is losing money, the current obligation resulting from the contract must be
accounted for and assessed as a provision.

A provision for restructuring costs is recognized only when the general criteria of
The recognition (defined above) of provisions is satisfied.

For example, an implicit obligation to restructure exists only if a company:

a formalized and detailed restructuring plan specifying at least:

the activity or the part of the activity concerned;
the main affected sites;
the location, the function and the approximate number of staff members who will be
compensated for the end of their employment contract;
the expenses that will be incurred;
and
the date on which the plan will be implemented;
and

created, among the concerned individuals, an expectation that she will implement the
restructuring either by starting to implement the plan or by announcing its main points to them
characteristics.

A provision for restructuring should only include expenses directly related to the
restructuring
that is to say the expenses that are both:

necessarily trained by restructuring;

and

that are not related to the activities pursued by the company.

Information to provide
For each category of provision, the company must provide information on:

the book value at the beginning and end of the financial year;

the additional provisions established during the financial year, including the increase in
existing provisions;

the amounts used during the financial year;

the unused amounts carried over during the financial year;

and
the increase during the exercise of the updated amount resulting from the passage of time and
of the effect of any change in the discount rate.

Comparative information is not mandatory. For each category of provisions, the company must
notably provide a brief description of the nature of the obligation, the expected due date, of the
relative uncertainties and, if applicable, the amount of any expected refund.

Unless the likelihood of an exit for settlement is very low, the company must provide, for
each category of contingent liability at the closing date, a brief description of the nature of this
possible liability and, as far as possible:

an estimate of its financial impact;

an indication of the uncertainties related to the amount or timing of any outflow;

and
the possibility of any refund.
When a flow of economic benefits is probable, the company must provide a brief
description of the nature of potential assets as of the closing date and, to the extent possible, a
estimation of their financial impact.

In extremely rare cases, the indication of certain information may cause harm.
seriousness to the company in a dispute opposing it to third parties on the subject of the provision,
potential liabilities or potential assets. In these cases, the company is not required to provide this information but
It must indicate the general nature of the dispute, the fact that this information has not been provided, as well.
that the reason they were not.