Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS37)

Background

The amendments related to this project Onerous Contracts—Cost of Fulfilling a Contract (Amendments to IAS 37) were published by the IASB in May 2020. These amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted.

Prior to these amendments, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, did not specify which costs to include in estimating the ‘cost of fulfilling’ a contract for the purpose of assessing whether that contract is onerous.

The amendments to IAS 37 specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. These costs can either be:

  • incremental costs of fulfilling that contract; or 
  • an allocation of other costs that relate directly to fulfilling contracts.


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