1、 Provisions, Contingent Liabilities and Contingent Assets FRS 37 Provisions, Contingent Liabilities and Contingent Assets was issued by the CCDG in January 2003. Consequential amendments were made in July 2004, September 2004 and January 2006. This Standard is operative for financial statements cove
2、ring periods beginning on or after 1st October 2000. FRS 37 FINANCIAL REPORTING STANDARD Contents OBJECTIVE SCOPE Paragraphs 1 - 9 DEFINITIONS 10 - 13 Provisions and Other Liabilities 11 Relationship between Provisions and Contingent Liabilities 12 - 13 RECOGNITION 14 - 35 Provisions 14 - 26 Present
3、 Obligation 15 - 16 Past Event 17 - 22 Probable Outflow of Resources Embodying Economic Benefits 23 - 24 Reliable Estimate of the Obligation 25 - 26 Contingent Liabilities 27 - 30 Contingent Assets 31 - 35 MEASUREMENT 36 - 52 Best Estimate 36 - 41 Risk and Uncertainties 42 - 44 Present Value 45 - 47
4、 Future Events 48 - 50 Expected Disposals of Assets 51 - 52 REIMBURSEMENTS 53 - 58 CHANGES IN PROVISIONS 59 - 60 USE OF PROVISIONS 61 - 62 APPLICATION OF THE RECOGNITION AND MEASUREMENT RULES 63 - 83 Future Operating Losses 63 - 65 Onerous Contracts 66 - 69 Restructuring 70 - 83 DISCLOSURE 84 - 92 T
5、RANSITIONAL PROVISIONS 93 - 94 EFFECTIVE DATE 95 - 96 APPENDICES A. Tables - Provisions, Contingent Liabilities, Contingent Assets and Reimbursements B. Decision Tree C. Examples: Recognition D. Examples: Disclosure Financial Reporting Standard 37 Provisions, Contingent Liabilities and Contingent As
6、sets (FRS 37) is set out in paragraphs 1-96. All the paragraphs have equal authority. FRS 37 should be read in the context of its objective, the Preface to the Financial Reporting Standards and the Framework for the Preparation and Presentation of Financial Statements. FRS 8 Accounting Policies, Cha
7、nges in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. 1 FINANCIAL REPORTING STANDARD FRS 37 Provisions, Contingent Liabilities and Contingent Assets Objective The objective of this Standard is to ensure that appro
8、priate 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. Scope 1. This Standard shall be applied by all entities i
9、n accounting for provisions, contingent liabilities and contingent assets, except: (a) those resulting from executory contracts, except where the contract is onerous; and (b) deleted (c) those covered by another Standard. 2. This Standard does not apply to financial instruments (including guarantees
10、) that are within the scope of FRS 39 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
11、 executory contracts unless they are onerous. 4. Deleted 5. Where another Standard deals with a specific type of provision, contingent liability or contingent asset, an entity applies that Standard instead of this Standard. For example, FRS 103 Business Combinations addresses the treatment by an acq
12、uirer of contingent liabilities assumed in a business combination. Similarly, certain types of provisions are also addressed in Standards on: (a) construction contracts (see FRS 11 Construction Contracts); (b) income taxes (see FRS 12 Income Taxes); (c) leases (see FRS 17 Leases). However, as FRS 17
13、 contains no specific requirements to deal with operating leases that have become onerous, this Standard applies to such cases; and (d) employee benefits (see FRS 19 Employee Benefits). (e) insurance contracts (see FRS 104 Insurance Contracts). However, this Standard applies to provisions, contingen
14、t liabilities and contingent assets of an insurer, other than those arising from its contractual obligations and rights under insurance contracts within the scope of FRS 104. 6. Some amounts treated as provisions may relate to the recognition of revenue, for example where an enterprise gives guarant
15、ees in exchange for a fee. This Standard does not address the recognition of revenue. FRS 18 Revenue identifies the circumstances in which revenue is 2 recognised and provides practical guidance on the application of the recognition criteria. This Standard does not change the requirements of FRS 18.
16、 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
17、 this Standard. 8. Other Financial Reporting 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. Thi
18、s Standard applies to provisions for restructurings (including discontinued operations). When a restructuring meets the definition of a discontinued operation, additional disclosures may be required by FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Definitions 10. The followin
19、g terms are used in this Standard with the meanings specified: A provision is a liability of uncertain timing or amount. A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embody
20、ing economic benefits. An obligating event is an event that creates a legal or constructive obligation that results in an enterprise having no realistic alternative to settling that obligation. A legal obligation is an obligation that derives from: (a) a contract (through its explicit or implicit te
21、rms); (b) legislation; or (c) other operation of law. A constructive obligation is an obligation that derives from an enterprises actions where: (a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the enterprise has indicated to other part
22、ies that it will accept certain responsibilities; and (b) as a result, the enterprise has created a valid expectation on the part of those other parties that it will discharge those responsibilities. A contingent liability is: (a) a possible obligation that arises from past events and whose existenc
23、e will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying e
24、conomic benefits will be required to settle the obligation; or 3 (ii) the amount of the obligation cannot be measured with sufficient reliability. 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
25、 or more uncertain future events not wholly within the control of the enterprise. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. A restructuring is a programme that is plann
26、ed and controlled by management, and materially changes either: (a) the scope of a business undertaken by an enterprise; or (b) the manner in which that business is conducted. Provisions and Other Liabilities 11. Provisions can be distinguished from other liabilities such as trade payables and accru
27、als because there is uncertainty about the timing or amount of the future expenditure required in settlement. By contrast: (a) trade payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier; and (b) accruals
28、 are liabilities to pay for goods or services that have been received or supplied but have not been paid, invoiced or formally agreed with the supplier, including amounts due to employees (for example, amounts relating to accrued vacation pay). Although it is sometimes necessary to estimate the amou
29、nt or timing of accruals, the uncertainty is generally much less than for provisions. Accruals are often reported as part of trade and other payables, whereas provisions are reported separately. Relationship between Provisions and Contingent Liabilities 12. In a general sense, all provisions are con
30、tingent because they are uncertain in timing or amount. However, within this Standard the term contingent is used for liabilities and assets that are not recognised because their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly wi
31、thin the control of the enterprise. In addition, the term contingent liability is used for liabilities that do not meet the recognition criteria. 13. This Standard distinguishes between: (a) provisions - which are recognised as liabilities (assuming that a reliable estimate can be made) because they
32、 are present obligations and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations; and (b) contingent liabilities - which are not recognised as liabilities because they are either: (i) possible obligations, as it has yet to be confirmed w
33、hether the enterprise has a present obligation that could lead to an outflow of resources embodying economic benefits; or 4 (ii) present obligations that do not meet the recognition criteria in this Standard (because either it is not probable that an outflow of resources embodying economic benefits
34、will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made). Recognition Provisions 14. A provision should be recognised when: (a) an enterprise has a present obligation (legal or constructive) as a result of a past event; (b) it is
35、probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision should be recognised. Present Obligation 15. In rare cases it is not cle
36、ar whether there is a present obligation. In these cases, a past event is deemed to give rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists at the balance sheet date. 16. In almost all cases it will be clear whether
37、a past event has given rise to a present obligation. In rare cases, for example in a law suit, it may be disputed either whether certain events have occurred or whether those events result in a present obligation. In such a case, an enterprise determines whether a present obligation exists at the ba
38、lance sheet date by taking account of all available evidence, including, for example, the opinion of experts. The evidence considered includes any additional evidence provided by events after the balance sheet date. On the basis of such evidence: (a) where it is more likely than not that a present o
39、bligation exists at the balance sheet date, the enterprise recognises a provision (if the recognition criteria are met); and (b) where it is more likely that no present obligation exists at the balance sheet date, the enterprise discloses a contingent liability, unless the possibility of an outflow
40、of resources embodying economic benefits is remote (see paragraph 86). Past Event 17. A past event that leads to a present obligation is called an obligating event. For an event to be an obligating event, it is necessary that the enterprise has no realistic alternative to settling the obligation cre
41、ated by the event. This is the case only: (a) where the settlement of the obligation can be enforced by law; or (b) in the case of a constructive obligation, where the event (which may be an action of the enterprise) creates valid expectations in other parties that the enterprise will discharge the
42、obligation. 5 18. Financial statements deal with the financial position of an enterprise at the end of its reporting period and not its possible position in the future. Therefore, no provision is recognised for costs that need to be incurred to operate in the future. The only liabilities recognised
43、in an enterprises balance sheet are those that exist at the balance sheet date. 19. It is only those obligations arising from past events existing independently of an enterprises future actions (i.e. the future conduct of its business) that are recognised as provisions. Examples of such obligations
44、are penalties or clean-up costs for unlawful environmental damage, both of which would lead to an outflow of resources embodying economic benefits in settlement regardless of the future actions of the enterprise. Similarly, an enterprise recognises a provision for the decommissioning costs of an oil
45、 installation or a nuclear power station to the extent that the enterprise is obliged to rectify damage already caused. In contrast, because of commercial pressures or legal requirements, an enterprise may intend or need to carry out expenditure to operate in a particular way in the future (for exam
46、ple, by fitting smoke filters in a certain type of factory). Because the enterprise can avoid the future expenditure by its future actions, for example by changing its method of operation, it has no present obligation for that future expenditure and no provision is recognised. 20. An obligation alwa
47、ys involves another party to whom the obligation is owed. It is not necessary, however, to know the identity of the party to whom the obligation is owed - indeed the obligation may be to the public at large. Because an obligation always involves a commitment to another party, it follows that a manag
48、ement or board decision does not give rise to a constructive obligation at the balance sheet date unless the decision has been communicated before the balance sheet date to those affected by it in a sufficiently specific manner to raise a valid expectation in them that the enterprise will discharge
49、its responsibilities. 21. An event that does not give rise to an obligation immediately may do so at a later date, because of changes in the law or because an act (for example, a sufficiently specific public statement) by the enterprise gives rise to a constructive obligation. For example, when environmental damage is caused there may be no obligation to remedy the consequences. However, the causing of the damage will become an obligating event when a new law requires the existing damage to be rectified or when the enterprise publicly accepts responsibility for rectification in a
