Marshall: proposed amendment to IAS 37 on onerous contracts

The introduction of IFRS 15, the new revenue recognition standard, has resulted in an unexpected interpretation problem concerning partial and full provision of contracts, which requires a review of IAS 37 provisioning rules. Andrew Marshall, senior technical partner at KPMG, examines potential clashes under the current interpretation

One of the unforeseen consequences of the implementation of IFRS 15 Revenue from Contracts with Customers, the new revenue standard, and the removal of IAS 18 Revenue and IAS 11 Construction Contracts, the old standards for respectively revenue and construction contracts, has been the need for IFRIC and the International Accounting Standards Board (IASB) to reconsider what IAS 37 Provisions, Contingent Liabilities and Contingent Assets says on provisions for onerous contracts, including loss making long-term contracts.

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