Targeted improvements to IAS 37

The proposals focused particularly on the concept of a present obligation, as a criterion for recognising a provision. The exposure draft proposed redefining the concept to comprise three conditions that must all be met, and that would be specified more clearly in the text of the standard: 

• an “obligation” condition – the entity has an obligation; 
• a “transfer” condition – the nature of the obligation requires the entity to transfer an economic resource; and 
• a “past-event” condition – the entity’s obligation is a present obligation resulting from a past event.  

The “transfer” condition was introduced in order to clarify the difference between provisions and executory contracts, bringing the definition into line with the current Conceptual Framework. 

Readers will remember that executory contracts are contracts that comprise reciprocal obligations for two parties (e.g. a sale contract), under which both parties have fulfilled their obligations to an equal extent. They do not give rise to recognition of a provision unless they are onerous. 

The “past-event” condition was introduced as a separate condition to change the timing of some provisions, which under the current rules are only recognised when the final condition giving rise to an obligation is met. Under the new rules, some of these provisions would be recognised earlier, and progressively over time. Typical examples would be: 

• taxes calculated on revenue, where the obligation to pay depends on a subsequent event, such as exceeding a specific revenue threshold, or the entity remaining in existence at the start of the following financial period; 
• commitments entered into at a given date to achieve a specified reduction in greenhouse gas emissions by a future target date. 

At its February 2026 meeting, the IASB continued its redeliberations on these proposed amendments, focusing on two topics in particular: 

• the “past-event” condition and how it applies specifically to levies; 
• the “transfer condition” applied more broadly (i.e. not specifically to levies).  

The “past-event” condition and how it applies to levies 

The IASB tentatively decided to supplement the “past-event” condition with the following requirements specifically for levies: 

• specifying that the economic benefit or action that meets the past-event condition for a levy is the economic benefit or activity the government is seeking to levy; and  
• adding a constraining presumption – namely, that the economic benefit or activity the government is seeking to levy will be one of those required by the levy legislation for the levy to be payable. 

The “transfer condition” applied broadly 

The IASB tentatively decided to: 

• keep the proposal to add a transfer condition; 
• further explain the difference between an obligation to transfer an economic resource and an obligation to exchange economic resources; 
• further develop examples given in the application guidance to clarify: 
  • why asset decommissioning and environmental rehabilitation obligations meet the transfer condition; and 
  • the relationship between the transfer condition and the measurement requirements in the standard; 
• clarify the implications of the transfer condition for levies by: 
  • defining the term “levy” as limited to non reciprocal charges; and 
  • specifying that a levy obligation will by definition meet the transfer condition.  

Next steps 

Further redeliberations on other aspects of the exposure draft will need to take place before the IASB can decide on the project direction.