77 In some countries, the ultimate authority is vested in a board whose membership includes representatives of interests other than those of management (eg employees) or notification to such representatives may be necessary before the board decision is taken. Because a decision by such a board involves communication to these representatives, it may result in a constructive obligation to restructure.
78 No obligation arises for the sale of an operation until the entity is committed to the sale, ie there is a binding sale agreement.
79 Even when an entity has taken a decision to sell an operation and announced that decision publicly, it cannot be committed to the sale until a purchaser has been identified and there is a binding sale agreement. Until there is a binding sale agreement, the entity will be able to change its mind and indeed will have to take another course of action if a purchaser cannot be found on acceptable terms. When the sale of an operation is envisaged as part of a restructuring, the assets of the operation are reviewed for impairment, under Ind AS 36. When a sale is only part of a restructuring, a constructive obligation can arise for the other parts of the restructuring before a binding sale agreement exists.
80 A restructuring provision shall include only the direct expenditures arising from the restructuring, which are those that are both:
(a) necessarily entailed by the restructuring; and
(b) not associated with the ongoing activities of the entity.
81 A restructuring provision does not include such costs as:
(a) retraining or relocating continuing staff;
(b) marketing; or
(c) investment in new systems and distribution networks.
These expenditures relate to the future conduct of the business and are not liabilities for restructuring at the end of the reporting period. Such expenditures are recognised on the same basis as if they arose independently of a restructuring.
82 Identifiable future operating losses up to the date of a restructuring are not included in a provision, unless they relate to an onerous contract as defined in paragraph 10.
83 As required by paragraph 51 , gains on the expected disposal of assets are not taken into account in measuring a restructuring provision, even if the sale of assets is envisaged as part of the restructuring.
Disclosure
84 For each class of provision, an entity shall disclose:
(a) the carrying amount at the beginning and end of the period;
(b) additional provisions made in the period, including increases to existing provisions;
(c) amounts used (ie incurred and charged against the provision) during the period;
(d) unused amounts reversed during the period; and
(e) the increase during the period in the discounted amount arising from the passage of time and the effect of any change in the discount rate.
Comparative information is not required.
85 An entity shall disclose the following for each class of provision:
(a) a brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits;
(b) an indication of the uncertainties about the amount or timing of those outflows. Where necessary to provide adequate information, an entity shall disclose the major assumptions made concerning future events, as addressed in paragraph 48; and
(c) the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement.
86 Unless the possibility of any outflow in settlement is remote, an entity shall disclose for each class of contingent liability at the end of the reporting period a brief description of the nature of the contingent liability and, where practicable:
(a) an estimate of its financial effect, measured under paragraphs 36– 52 ;
(b) an indication of the uncertainties relating to the amount or timing of any outflow; and
(c) the possibility of any reimbursement.
87 In determining which provisions or contingent liabilities may be aggregated to form a class, it is necessary to consider whether the nature of the items is sufficiently similar for a single statement about them to fulfil the requirements of paragraphs 85(a) and (b) and 86(a) and (b). Thus, it may be appropriate to treat as a single class of provision amounts relating to warranties of different products, but it would not be appropriate to treat as a single class amounts relating to normal warranties and amounts that are subject to legal proceedings.
88 Where a provision and a contingent liability arise from the same set of circumstances, an entity makes the disclosures required by paragraphs 84–86 in a way that shows the link between the provision and the contingent liability.
89 Where an inflow of economic benefits is probable, an entity shall disclose a brief description of the nature of the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial effect, measured using the principles set out for provisions in paragraphs 36 – 52.
90 It is important that disclosures for contingent assets avoid giving misleading indications of the likelihood of income arising.
91 Where any of the information required by paragraphs 86 and 89 is not disclosed because it is not practicable to do so, that fact shall be stated.
92 In extremely rare cases, disclosure of some or all of the information required by paragraphs 84 – 89 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed.
9 Transitional Provisions
93 *
94 *
94A 10 Onerous Contracts—Cost of Fulfilling a Contract , added paragraph 68A and amended paragraph 69. An entity shall apply those amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). The entity shall not restate comparative information. Instead, the entity shall recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application.
Effective date
95 *
96 *
97 *
98 *
99 *
100 As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers , paragraph 5 is amended and paragraph 6 is deleted. An entity shall apply those amendments when it applies Ind AS 115.
101 11 Omitted *
102 Ind AS 116, amended paragraph 5. An entity shall apply that amendment when it applies Ind AS 116.
103 12 Ind AS 117 amended paragraph 5 . An entity shall apply that amendment when it applies Ind AS 117.
104 13 Definition of Material (Amendments to Ind AS 1 and Ind AS 8), amended paragraph 75. An entity shall apply those amendments when it applies the amendments to the definition of material in paragraph 7 of Ind AS 1 and paragraphs 5 and 6 of Ind AS 8.
105 14 Onerous Contracts—Cost of Fulfilling a Contract , added paragraphs 68A and 94A and amended paragraph 69. An entity shall apply those amendments for annual reporting periods beginning on or after 1 st April, 2022.
Appendix A
Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
This Appendix is an integral part of the Ind AS.
Background
1 The purpose of decommissioning, restoration and environmental rehabilitation funds, hereafter referred to as ‘decommissioning funds’ or ‘funds’, is to segregate assets to fund some or all of the costs of decommissioning plant (such as a nuclear plant) or certain equipment (such as cars), or in undertaking environmental rehabilitation (such as rectifying pollution of water or restoring mined land), together referred to as ‘decommissioning’.
2 Contributions to these funds may be voluntary or required by regulation or law. The funds may have one of the following structures:
(a) funds that are established by a single contributor to fund its own decommissioning obligations, whether for a particular site, or for a number of geographically dispersed sites.
(b) funds that are established with multiple contributors to fund their individual or joint decommissioning obligations, when contributors are entitled to reimbursement for decommissioning expenses to the extent of their contributions plus any actual earnings on those contributions less their share of the costs of administering the fund. Contributors may have an obligation to make additional contributions, for example, in the event of the bankruptcy of another contributor.
(c) funds that are established with multiple contributors to fund their individual or joint decommissioning obligations when the required level of contributions is based on the current activity of a contributor and the benefit obtained by that contributor is based on its past activity. In such cases there is a potential mismatch in the amount of contributions made by a contributor (based on current activity) and the value realisable from the fund (based on past activity).
3 Such funds generally have the following features:
(a) the fund is separately administered by independent trustees.
(b) entities (contributors) make contributions to the fund, which are invested in a range of assets that may include both debt and equity investments, and are available to help pay the contributors’ decommissioning costs. The trustees determine how contributions are invested, within the constraints set by the fund’s governing documents and any applicable legislation or other regulations.
(c) the contributors retain the obligation to pay decommissioning costs. However, contributors are able to obtain reimbursement of decommissioning costs from the fund up to the lower of the decommissioning costs incurred and the contributor’s share of assets of the fund.
(d) the contributors may have restricted access or no access to any surplus of assets of the fund over those used to meet eligible decommissioning costs.
Scope
4 This Appendix applies to accounting in the financial statements of a contributor for interests arising from decommissioning funds that have both of the following features:
(a) the assets are administered separately (either by being held in a separate legal entity or as segregated assets within another entity); and
(b) a contributor’s right to access the assets is restricted.
5 A residual interest in a fund that extends beyond a right to reimbursement, such as a contractual right to distributions once all the decommissioning has been completed or on winding up the fund, may be an equity instrument within the scope of Ind AS 109 and is not within the scope of this Appendix.
Issues
6 The issues addressed in this Appendix are:
(a) how should a contributor account for its interest in a fund?
(b) when a contributor has an obligation to make additional contributions, for example, in the event of the bankruptcy of another contributor, how should that obligation be accounted for?
Accounting Principles
Accounting for an interest in a fund
7 The contributor shall recognise its obligation to pay decommissioning costs as a liability and recognise its interest in the fund separately unless the contributor is not liable to pay decommissioning costs even if the fund fails to pay.
8 The contributor shall determine whether it has control or joint control of, or significant influence over, the fund by reference to Ind AS 110, Consolidated Financial Statements , Ind AS 111, Joint Arrangements , and Ind AS 28, Investments in Associates and Joint Ventures . If it does, the contributor shall account for its interest in the fund in accordance with those Standards.
9 If a contributor does not have control or joint control of, or significant influence over, the fund, the contributor shall recognise the right to receive reimbursement from the fund as a reimbursement in accordance with Ind AS 37. This reimbursement shall be measured at the lower of:
(a) the amount of the decommissioning obligation recognised; and
(b) the contributor’s share of the fair value of the net assets of the fund attributable to contributors.
Changes in the carrying value of the right to receive reimbursemen t other than contributions to and payments from the fund shall be recognised in profit or loss in the period in which these changes occur.
Accounting for obligations to make additional contributions
10 When a contributor has an obligation to make potential additional contributions, for example, in the event of the bankruptcy of another contributor or if the value of the investment assets held by the fund decreases to an extent that they are insufficient to fulfil the fund’s reimbursement obligations, this obligation is a contingent liability that is within the scope of Ind AS 37. The contributor shall recognise a liability only if it is probable that additional contributions will be made.
11 A contributor shall disclose the nature of its interest in a fund and any restrictions on access to the assets in the fund.
12 When a contributor has an obligation to make potential additional contributions that is not recognised as a liability (see paragraph 10), it shall make the disclosures required by paragraph 86 of Ind AS 37.
13 When a contributor accounts for its interest in the fund in accordance with paragraph 9, it shall make the disclosures required by paragraph 85(c) of Ind AS 37.
Appendix B
Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment 15
1 Paragraph 17 of Ind AS 37 specifies that an obligating event is a past event that leads to a present obligation that an entity has no realistic alternative to settling.
2 Paragraph 19 of Ind AS 37 states that provisions are recognised only for ‘obligations arising from past events existing independently of an entity’s future actions’.
3 The European Union’s Directive on Waste Electrical and Electron ic Equipment (WE&EE), which regulates the collection, treatment, recovery and environmentally sound disposal of waste equipment, has given rise to questions about when the liability for the decommissioning of WE&EE should be recognised. The Directive distinguishes between ‘new’ and ‘historical’ waste and between waste from private households and waste from sources other than private households. New waste relates to products sold after 13 August 2005. All household equipment sold before that date is deemed to give rise to historical waste for the purposes of the Directive.
4 The Directive states that the cost of waste management for historical household equipment should be borne by producers of that type of equipment that are in the market during a period to be specified in the applicable legislation of each Member State (the measurement period). The Directive states that each Member State shall establish a mechanism to have producers contribute to costs proportionately ‘e.g. in proportion to their respective share of the market by type of equipment.’
5 Several terms used in this Appendix such as ‘market share’ and ‘measurement period’ may be defined very differently in the applicable legislation of individual Member States. For example, the length of the measurement period might be a year or only one month. Similarly, the measurement of market share and the formulae for computing the obligation may differ in the various national legislations. However, all of these examples affect only the measurement of the liability, which is not within the scope of this Appendix.
6 This Appendix provides guidance on the recognition, in the financial statements of producers, of liabilities for waste management under the EU Directive on WE&EE in respect of sales of historical household equipment.
7 This Appendix addresses neither new waste nor historical waste from sources other than private households. The liability for such waste management is adequately covered in Ind AS 37. However, if, in national legislation, new waste from private households is treated in a similar manner to historical waste from private households, the principles of this Appendix apply by reference to the hierarchy in paragraphs 10-12 of Ind AS 8. The Ind AS 8 hierarchy is also relevant for other regulations that impose obligations in a way that is similar to the cost attribution model specified in the EU Directive.
Issue
8 This Appendix determines in the context of the decommissioning of WE&EE what constitutes the obligating event in accordance with paragraph 14(a) of Ind AS 37 for the recognition of a provision for waste management costs:
the manufacture or sale of the historical household equipment?
participation in the market during the measurement period?
the incurrence of costs in the performance of waste management activities?
9 Participation in the market during the measurement period is the obligating event in accordance with paragraph 14(a) of Ind AS 37. As a consequence, a liability for waste management costs for historical household equipment does not arise as the products are manufactured or sold. Because the obligation for historical household equipment is linked to participation in the market during the measurement period, rather than to production or sale of the items to be disposed of, there is no obligation unless and until a market share exists during the measurement period. The timing of the obligating event may also be independent of the particular period in which the activities to perform the waste management are undertaken and the related costs incurred.
Appendix C
Levies
1. A government may impose a levy on an entity. An issue arises when to recognise a liability to pay a levy that is accounted for in accordance with Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets .
2. This Appendix addresses the accounting for a liability to pay a levy if that liability is within the scope of Ind AS 37. It also addresses the accounting for a liability to pay a levy whose timing and amount is certain.
3. This Appendix does not address the accounting for the costs that arise from recognising a liability to pay a levy. Entities should apply other Standards to decide whether the recognition of a liability to pay a levy gives rise to an asset or an expense.
4. For the purposes of this Appendix, a levy is an outflow of resources embodying economic benefits that is imposed by governments on entities in accordance with legislation (ie laws and/or regulations) , other than:
(a) those outflows of resources that are within the scope of other Standards (such as income taxes that are within the scope of Ind AS 12, Income Taxes ); and
(b) fines or other penalties that are imposed for breaches of the legislation.
‘Government’ refers to government, government agencies and similar bodies whether local, national or international.
5. A payment made by an entity for the acquisition of an asset, or for the rendering of services under a contractual agreement with a government, does not meet the definition of a levy.
6. An entity is not required to apply this Appendix to liabilities that arise from emissions trading schemes.
7. To clarify the accounting for a liability to pay a levy, this Appendix addresses the following issues:
(a) what is the obligating event that gives rise to the recognition of a liability to pay a levy?
(b) does economic compulsion to continue to operate in a future period create a constructive obligation to pay a levy that will be triggered by operating in that future period?
(c) does the going concern assumption imply that an entity has a present obligation to pay a levy that will be triggered by operating in a future period?
(d) does the recognition of a liability to pay a levy arise at a point in time or does it, in some circumstances, arise progressively over time?
(e) what is the obligating event that gives rise to the recognition of a liability to pay a levy that is triggered if a minimum threshold is reached?
(f) are the principles for recognising in the annual financial statements and in the interim financial report a liability to pay a levy the same?
8. The obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by the legislation. For example, if the activity that triggers the payment of the levy is the generation of revenue in the current period and the calculation of that levy is based on the revenue that was generated in a previous period, the obligating event for that levy is the generation of revenue in the current period. The generation of revenue in the previous period is necessary, but not sufficient, to create a present obligation.
9. An entity does not have a constructive obligation to pay a levy that will be triggered by operating in a future period as a result of the entity being economically compelled to continue to operate in that future period.
10. The preparation of financial statements under the going concern assumption does not imply that an entity has a present obligation to pay a levy that will be triggered by operating in a future period.
11. The liability to pay a levy is recognised progressively if the obligating event occurs over a period of time (ie if the activity that triggers the payment of the levy, as identified by the legislation, occurs over a period of time). For example, if the obligating event is the generation of revenue over a period of time, the corresponding liability is recognised as the entity generates that revenue.
12. If an obligation to pay a levy is triggered when a minimum threshold is reached, the accounting for the liability that arises from that obligation shall be consistent with the principles established in paragraphs 8 –14 of this Appendix (in particular, paragraphs 8 and 11). For example, if the obligating event is the reaching of a minimum activity threshold (such as a minimum amount of revenue or sales generated or outputs produced), the corresponding liability is recognised when that minimum activity threshold is reached.
13. An entity shall apply the same recognition principles in the interim financial report that it applies in the annual financial statements. As a result, in the interim financial report, a liability to pay a levy:
(a) shall not be recognised if there is no present obligation to pay the levy at the end of the interim reporting period; and
(b) shall be recognised if a present obligation to pay the levy exists at the end of the interim reporting period.
14. An entity shall recognise an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy.
Appendix D
References to matters contained in other Indian Accounting Standards
This appendix lists the appendices which are part of other Indian Accounting Standards and makes references to Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets.
(i) 16 Appendix D, Service Concession Arrangements and Appendix E, Service Concession Arrangements: Disclosures, contained in Ind AS 115, Revenue from Contracts with Customers.
(ii) Appendix A, Changes in Existing Decommissioning, Restoration and Similar Liabilities, contained in Ind AS 16, Property, Plant and Equipment .
(iii) Omitted 17
Appendix 1
Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 37 and the corresponding International Accounting Standard (IAS) 37, Provisions, Contingent Liabilities and Contingent Assets, IFRIC 5, Rights to Interests arising from Decommissioning Restoration and Environmental Rehabilitation Funds, IFRIC 6, Liabilities arising from Participating in Specific Market-Waste electrical and Electronic Equipment and IFRIC 21, Levies, issued by the International Accounting Standards Board.
Comparison with IAS 37, Provisions, Contingent Liabilities and Contingent Assets , IFRIC 5, IFRIC 6 and IFRIC 21
1 The transitional provisions given in IAS 37 and IFRIC 5 and IFRIC 6 have not been given in Ind AS 37, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards, corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards
2 Different terminology is used in this standard, eg, term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and loss is used instead of ‘Statement of comprehensive income’. Words ‘approval of the financial statements for issue have been used instead of ‘authorisation of the financial statements for issue’ in the context of financial statements considered for the purpose of events after the reporting period.
3 18 The following paragraph numbers have been omitted in IAS 37. In order to maintain consistency with paragraph numbers of IAS 37, the paragraph numbers are retained in Ind AS 37:
(i) paragraph 1(b)
(ii) paragraph 4
(iii) paragraph 5(a)
(iv) paragraph 6.
4. 19 Paragraphs 93-99 and 101 related to Transitional Provisions and Effective date given in IAS 37 have not been given in Ind AS 37, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards and paragraphs related to Effective date are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 37, these paragraph numbers are retained in Ind AS 37.
Footnotes
# This Ind AS was notified vide G.S.R. 111(E) dated 16t h February, 2015 and was amended vide Notification No. G.S.R. 365(E) dated 30 t h March, 2016, G.S.R. 310(E) dated 28 t h March, 2018, G.S.R. 273(E) dated 30 t h March, 2019, G.S.R. 463(E) dated 24 t h July, 2020, G.S.R. 419(E) dated 18 t h June, 2021, G.S.R. 255(E) dated 23 r d March, 2022 and G.S.R. 492(E) dated 12th August, 2024.
1 Substituted vide Notification No. G.S.R. 365(E) dated 30t h March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28 t h March, 2018.
* Refer Appendix 1
2 Substituted vide Notification No. G.S.R. 273(E) dated 30t h March, 2019.
3 Substituted vide Notification No. G.S.R. 492(E) dated 12th August, 2024.
4 Refer Appendix 1. Substituted vide Notification No. G.S.R. 365(E) dated 30t h March, 2016 and omitted vide Notification No. G.S.R. 310(E) dated 28 t h March, 2018.
* The definition of a liability in this Standard is not revised following the revision of the definition of a liability in the Conceptual Framework for Financial Reporting under Indian Accounting Standards issued in 2021 by the Institute of Chartered Accountants of India. [This footnote was inserted vide Notification No. G.S.R. 419(E) dated 18th June, 2021.]
5 The interpretation of ‘probable’ in this Standard as ‘more likely than not’ does not necessarily apply in other Indian Accounting Standards.
6 Inserted vide Notification No. G.S.R. 255(E) dated 23 rd March, 2022.
7 Substituted vide Notification No. G.S.R. 255(E) dated 23 rd March, 2022.
8 Substituted vide Notification No. G.S.R. 463(E) dated 24t h July, 2020.
9 Headings and paragraphs 93-100 inserted vide Notification No. G.S.R. 310(E) dated 28 t h March, 2018.
10 Inserted vide Notification No. G.S.R. 255(E) dated 23 rd March, 2022.
11 Paragraphs 101-102 inserted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
12 Inserted vide Notification No. G.S.R. 463(E) dated 24 th July, 2020 and, thereafter, substituted vide Notification No. G.S.R. 492(E) dated 12th August, 2024.
13 Inserted vide Notification No. G.S.R. 463(E) dated 24 th July, 2020.
14 Inserted vide Notification No. G.S.R. 255(E) dated 23 th March, 2022.
15 This Appendix is in the context of European Union. However, if similar regulations exist in other countries including India the principles as enunciated in this Appendix shall apply.
16 Substituted vide Notification No. G.S.R. 365(E) dated 30 th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.
17 Omitted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
18 Substituted vide Notification No. G.S.R. 365(E) dated 30 th March, 2016and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.
19 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018 and, thereafter, substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019, G.S.R. 463(E) dated 24 th July, 2020 and G.S.R. 492(E) dated 12th August, 2024.
