AASB137 07-04 COMPjun 14 04-14 PDF

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Compiled AASB Standard

AASB 137

Provisions, Contingent Liabilities and Contingent Assets This compiled Standard applies to annual reporting periods beginning on or after 1 July 2014 but before 1 January 2018. Early application is permitted for annual reporting periods beginning on or after 1 January 2014 but before 1 July 2014. It incorporates relevant amendments made up to and including 4 June 2014. Prepared on 27 August 2014 by the staff of the Australian Accounting Standards Board.

Obtaining Copies of Accounting Standards Compiled versions of Standards, original Standards and amending Standards (see Compilation Details) are available on the AASB website: www.aasb.gov.au. Printed copies of original Standards and amending Standards are available for purchase by contacting: The Customer Service Officer Australian Accounting Standards Board Level 7 600 Bourke Street Melbourne Victoria AUSTRALIA

Postal address: PO Box 204 Collins Street West Victoria 8007 AUSTRALIA

Phone: (03) 9617 7637 Fax: (03) 9617 7608 E-mail: [email protected] Website: www.aasb.gov.au

Other Enquiries Phone: Fax: E-mail:

(03) 9617 7600 (03) 9617 7608 [email protected]

COPYRIGHT © 2014 Commonwealth of Australia This compiled AASB Standard contains IFRS Foundation copyright material. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Director of Finance and Administration, Australian Accounting Standards Board, PO Box 204, Collins Street West, Victoria 8007. All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Australia should be addressed to the IFRS Foundation at www.ifrs.org. AASB 137-compiled

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COPYRIGHT

CONTENTS COMPILATION DETAILS COMPARISON WITH IAS 37 ACCOUNTING STANDARD AASB 137 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Paragraphs Objective Application Aus1.1 – Aus1.7 Reduced Disclosure Requirements Aus1.8 – Aus1.9 Scope 1–9 Definitions 10 Provisions and Other Liabilities 11 Relationship between Provisions and Contingent Liabilities 12 – 13 Recognition Provisions 14 Present Obligation 15 – 16 Past Event 17 – 22 Probable Outflow of Resources Embodying Economic Benefits 23 – 24 Reliable Estimate of the Obligation 25 – 26 Recognition of Liabilities Arising from Local Government and Government Existing Public Policies, Budget Policies, Election Promises or Statements of Intent Aus26.1 – Aus26.2 Contingent Liabilities 27 – 30 Contingent Assets 31 – 35 Measurement Best Estimate 36 – 41 Risks and Uncertainties 42 – 44 Present Value 45 – 47 Future Events 48 – 50 Expected Disposal of Assets 51 – 52 Reimbursements 53 – 58 Changes in Provisions 59 – 60 AASB 137-compiled

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CONTENTS

Use of Provisions Application of the Recognition and Measurement Rules Future Operating Losses Onerous Contracts Restructuring Disclosure Effective Date of IAS 37

61 – 62 63 – 65 66 – 69 70 – 83 84 – 92 99

GUIDANCE ON IMPLEMENTING AASB 137 A Tables – Provisions, Contingent Liabilities, Contingent Assets and Reimbursements B Decision Tree C Examples: Recognition D Examples: Disclosures

Page 32 Page 35 Page 36 Page 43

DELETED IAS 37 TEXT

Page 45

Australian Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets (as amended) is set out in paragraphs Aus1.1 – 99. All the paragraphs have equal authority. Terms defined in this Standard are in italics the first time they appear in the Standard. AASB 137 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

AASB 137-compiled

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CONTENTS

COMPILATION DETAILS Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets as amended This compiled Standard applies to annual reporting periods beginning on or after 1 July 2014 but before 1 January 2018. It takes into account amendments up to and including 4 June 2014 and was prepared on 27 August 2014 by the staff of the Australian Accounting Standards Board (AASB). This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 137 (July 2004) as amended by other Accounting Standards, which are listed in the Table below.

Table of Standards Standard

Date made

Application date (annual reporting periods … on or after …)

AASB 137 AASB 2007-4 AASB 2007-8 AASB 2007-9 AASB 2007-10 AASB 2008-3 AASB 2009-6

15 Jul 2004 30 Apr 2007 24 Sep 2007 13 Dec 2007 13 Dec 2007 6 Mar 2008 25 Jun 2009

AASB 2009-12 AASB 2010-2 AASB 2010-5 AASB 2010-7 AASB 2012-10 AASB 2013-9 AASB 2014-1

15 Dec 2009 30 Jun 2010 27 Oct 2010 6 Dec 2010 18 Dec 2012 20 Dec 2013 4 Jun 2014

(beginning) 1 Jan 2005 (beginning) 1 Jul 2007 (beginning) 1 Jan 2009 (beginning) 1 Jul 2008 (beginning) 1 Jan 2009 (beginning) 1 Jul 2009 (beginning) 1 Jan 2009 and (ending) 30 Jun 2009 (beginning) 1 Jan 2011 (beginning) 1 Jul 2013 (beginning) 1 Jan 2011 (beginning) 1 Jan 2018 (beginning) 1 Jan 2013 Pt B (beginning) 1 Jan 2014 Pt A (beginning) 1 Jul 2014 Pt E (beginning) 1 Jan 2018

Application, saving or transitional provisions see (a) below see (b) below see (c) below see (b) below see (d) below see (e) below see (f) below see (g) below see (f) below not compiled* see (h) below see (i) below see (j) below not compiled*

*

The amendments made by this Standard are not included in this compilation, which presents the principal Standard as applicable to annual reporting periods beginning on or after 1 July 2014 but before 1 January 2018.

(a)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2007.

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COMPILATION DETAILS

(b)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods.

(c)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2008, provided that the Standards and Interpretation listed in paragraph 6 of AASB 2007-9 are also applied to such periods.

(d)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 30 June 2007 but before 1 July 2009, provided that AASB 3 Business Combinations (March 2008) and AASB 127 Consolidated and Separate Financial Statements (March 2008) are also applied to such periods.

(e)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods, and to annual reporting periods beginning on or after 1 January 2009 that end before 30 June 2009.

(f)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2011.

(g)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 Application of Tiers of Australian Accounting Standards is also applied to such periods.

(h)

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.

(i)

Early application of Part B of this Standard is not permitted.

(j)

Entities may elect to apply Part A of this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2014.

Table of Amendments to Standard Paragraph affected

How affected

By … [paragraph]

Objective Aus1.1 Aus1.4

amended amended amended deleted added

AASB 2007-4 [97] AASB 2007-8 [7, 8] AASB 2007-8 [8] AASB 2013-9B [37] AASB 2010-2 [43]

amended amended amended amended amended amended amended amended

AASB 2008-3 [69] AASB 2014-1A [26] AASB 2009-12 [17] AASB 2010-5 [53] AASB 2007-8 [6] AASB 2007-10 [85] AASB 2007-8 [122] AASB 2007-10 [88]

Aus1.8-Aus1.9 (and preceding heading) 5 16 18 25

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COMPILATION DETAILS

Paragraph affected

How affected

By … [paragraph]

Aus26.1-Aus26.2 (and preceding heading) 30 33 35 38 41 46 54 75

added

AASB 2007-9 [20]

amended amended amended amended amended amended amended amended amended amended amended added

AASB 2007-10 [88] AASB 2007-10 [86] AASB 2007-10 [88] AASB 2009-12 [17] AASB 2007-4 [97] AASB 2009-12 [17] AASB 2007-8 [6] AASB 2007-8 [6] AASB 2007-10 [88] AASB 2009-6 [83] AASB 2009-12 [17] AASB 2014-1A [26]

99

Table of Amendments to Guidance Paragraph affected

How affected

By … [paragraph]

A, title, rubric, heading A, Reimbursements B, title, rubric, heading C, title, rubric, heading C, Example 2A C, Example 6 C, Example 9 C, Example 10

amended amended amended amended amended amended amended amended amended amended

AASB 2010-5 [54, 55] AASB 2007-8 [6] AASB 2010-5 [56] AASB 2010-5 [57] AASB 2007-4 [97] AASB 2009-6 [84] AASB 2012-10 [65] AASB 2007-10 [87, 88] AASB 2009-6 [84] AASB 2010-5 [58]

D, title, rubric, heading

General Terminology Amendments References to ‘reporting date’ and ‘each reporting date’ were amended to ‘end of the reporting period’ and ‘the end of each reporting period’ respectively by AASB 2007-8. These amendments are not shown in the above Tables of Amendments.

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COMPILATION DETAILS

COMPARISON WITH IAS 37 AASB 137 and IAS 37 AASB 137 Provisions, Contingent Liabilities and Contingent Assets as amended incorporates IAS 37 Provisions, Contingent Liabilities and Contingent Assets as issued and amended by the International Accounting Standards Board (IASB). Paragraphs that have been added to this Standard (and do not appear in the text of IAS 37) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering.

Compliance with IAS 37 Entities that comply with AASB 137 as amended will simultaneously be in compliance with IAS 37 as amended. Not-for-profit entities using the added “Aus” paragraphs in the Standard that specifically apply to not-for-profit entities may not be simultaneously complying with IAS 37. Whether a not-for-profit entity will be in compliance with IAS 37 will depend on whether the “Aus” paragraphs provide additional guidance for not-for-profit entities or contain requirements that are inconsistent with the corresponding IASB Standard and will be applied by the not-for-profit entity. Entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements will not be in compliance with IAS 37.

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COMPARISON

ACCOUNTING STANDARD AASB 137 The Australian Accounting Standards Board made Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets under section 334 of the Corporations Act 2001 on 15 July 2004. This compiled version of AASB 137 applies to annual reporting periods beginning on or after 1 July 2014 but before 1 January 2018. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 4 June 2014 (see Compilation Details).

ACCOUNTING STANDARD AASB 137 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Objective The objective of this Standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount.

Application Aus1.1

Aus1.2

This Standard applies to: (a)

each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;

(b)

general purpose financial statements of each other reporting entity; and

(c)

financial statements that are, or are held out to be, general purpose financial statements.

This Standard applies to annual reporting periods beginning on or after 1 January 2005. [Note: For application dates of paragraphs changed or added by an amending Standard, see Compilation Details.]

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STANDARD

Aus1.3

This Standard shall not be applied to annual reporting periods beginning before 1 January 2005.

Aus1.4

[Deleted by the AASB]

Aus1.5

When applicable, this Standard supersedes AASB 1044 Provisions, Contingent Liabilities and Contingent Assets as notified in the Commonwealth of Australia Gazette No S 450, 26 October 2001.

Aus1.6

AASB 1044 remains applicable until superseded by this Standard.

Aus1.7

Notice of this Standard was published in the Commonwealth of Australia Gazette No S 294, 22 July 2004.

Reduced Disclosure Requirements Aus1.8

The following do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements: (a)

paragraphs 84(b), 84(e) and 85(c);

(b)

in paragraph 75, the text “If an entity starts to … of the financial statements.”; and

(c)

in paragraph 85(b), the text “. Where necessary … paragraph 48”.

Entities applying Australian Accounting Standards – Reduced Disclosure Requirements may elect to comply with some or all of these excluded requirements. Aus1.9

The requirements that do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements are identified in this Standard by shading of the relevant text.

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STANDARD

Scope 1

This Standard shall be applied by all entities in accounting for provisions, contingent liabilities and contingent assets, except: (a)

those resulting from executory contracts, except where the contract is onerous1; and

(b)

[Deleted by the IASB];

(c)

those covered by another Australian Accounting Standard.

2

This Standard does not apply to financial instruments (including guarantees) that are within the scope of AASB 139 Financial Instruments: Recognition and Measurement.

3

Executory contracts are contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent. This Standard does not apply to executory contracts unless they are onerous.

4

[Deleted by the IASB]

5

When another Australian Accounting Standard deals with a specific type of provision, contingent liability or contingent asset, an entity applies that Standard instead of this Standard. For example, some types of provisions are addressed in Standards on:

1

(a)

construction contracts (see AASB 111 Construction Contracts);

(b)

income taxes (see AASB 112 Income Taxes);

(c)

leases (see AASB 117 Leases). However, as AASB 117 contains no specific requirements to deal with operating leases that have become onerous, this Standard applies to such cases;

(d)

employee benefits (see AASB 119 Employee Benefits);

(e)

insurance contracts (see AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts, and AASB 1038 Life Insurance Contracts). However, this Standard applies to provisions, contingent liabilities and contingent assets of an insurer, other than those arising from its contractual obligations and rights under insurance contracts within the scopes of AASB 4, AASB 1023 or AASB 1038; and

‘Onerous contract’ is a defined term.

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STANDARD

(f)

contingent consideration of an acquirer in a business combination (see AASB 3 Business Combinations).

6

Some amounts treated as provisions may relate to the recognition of revenue, for example where an entity gives guarantees in exchange for a fee. This Standard does not address the recognition of revenue. AASB 118 Revenue identifies the circumstances in which revenue is recognised and provides practical guidance on the application of the recognition criteria. This Standard does not change the requirements of AASB 118.

7

This Standard defines provisions as liabilities of uncertain timing or amount. In some countries the term ‘provision’ is also used in the context of items such as depreciation, impairment of assets and doubtful debts: these are adjustments to the carrying amounts of assets and are not addressed in this Standard.

8

Other Australian Accounting Standards specify whether expenditures are treated as assets or as expenses. These issues are not addressed in this Standard. Accordingly, this Standard neither prohibits nor requires capitalisation of the costs recognised when a provision is made.

9

This Standard applies to provisions for restructuring (including discontinued operations). When a restructuring meets the definition of a discontinued operation, additional disclosures may be required by AASB 5 Non-current Assets Held for Sale and Discontinued Operations.

Definitions 10

The following terms are used in this Standard with the meanings specified. A constructive obligation is an obligation that derives from an entity’s actions where: (a)

by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and

(b)

as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

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STANDARD

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent liability is: (a)