IAS 37 defines and prescribes the accounting and disclosure requirements for provisions (liabilities of uncertain timing or amount), as well as contingent liabilities (possible obligations and present obligations that are not probable or cannot be measured reliably) and contingent assets (possible assets).
Both IAS 37 and VAS 18 share similarities regarding the recognition, measurement, and presentation of provisions, contingent assets, and contingent liabilities.
1. Key Issues to Note During Transition
| Content | IFRS | VAS |
| IAS 37 and VAS 18 – Provisions, Contingent Assets, and Contingent Liabilities | ||
| Scope | This standard does not apply to provisions, contingent assets, or contingent liabilities arising from executory contracts (contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent), unless the contract is deemed to be onerous. | Not addressed. |
| Measurement and Recognition Rules | In cases where it is uncertain whether certain events have resulted in a liability, the entity must determine whether a liability exists at the end of the reporting period, considering all current evidence, including the opinions of experts. The evidence considered includes any additional evidence about events occurring after the reporting date. Based on this evidence: (a) When it is probable that a present obligation exists at the end of the reporting period, the entity recognizes a provision (if the recognition criteria are met); and (b) When it is probable that no present obligation exists at the end of the reporting period, the entity discloses a contingent liability, unless the possibility of an outflow of economic benefits is remote. | In cases where it is uncertain whether certain events have resulted in a liability, the entity must determine whether a liability exists at the end of the reporting period, considering all current evidence, including the opinions of experts. The evidence considered includes any additional evidence about events occurring after the reporting date. Based on the following indicators: a) When it is certain that a liability exists at the end of the financial year, the entity must recognize a provision (if the recognition criteria are satisfied); and b) When it is certain that no liability exists at the end of the financial year, the entity must disclose a contingent liability in the financial statement notes, unless the likelihood of an outflow of economic benefits is very remote. |
| Asset Impairment | IAS 37 requires entities to assess the impairment of assets expected to bear losses when operating in the future or to fulfill high-risk contracts. IAS 36 “Impairment of Assets” is the standard applied to the adjustment and accounting of impairment losses under these circumstances. | VAS 18 requires entities to assess the impairment of assets expected to bear losses when operating in the future or to fulfill high-risk contracts. However, there is no equivalent VAS standard to IAS 36 “Impairment of Assets” for the adjustment and accounting of impairment losses. |
2. Tasks to Be Performed
- Review whether any contracts have risks that require recognition.
