In this comment letter(pdf,59kb), we responded to the IFRS IC's tentative agenda decision on IAS 37 - Costs considered in assessing whether a contract is onerous, on behalf of PricewaterhouseCoopers.
Mr. Henry Rees
Director of Implementation and Adoption Activities
International Accounting Standards Board
30 Cannon Street
London EC4M 6XH
2 August 2017
Interpretations Committee Tentative Agenda Decision: IAS 37 Provisions, Contingent Liabilities and Contingent Assets – Costs considered in assessing whether a contract is onerous
We are responding to the IFRS IC’s tentative agenda decision on IAS 37 Provisions, Contingent Liabilities and Contingent Assets – Costs considered in assessing whether a contract is onerous, on behalf of PricewaterhouseCoopers. Following consultation with members of the PricewaterhouseCoopers network of firms, this response summarises the views of member firms who commented on the rejection. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
We agree that an entity should apply the requirements of IAS 37 when assessing whether a contract with a customer is onerous. Neither the previous requirements in IAS 11 nor the guidance in IFRS 15 on contract costs is relevant in this context.
However, we do not support the tentative agenda decision, which concludes that there are two reasonable ways to read the reference to ‘unavoidable costs’ in paragraph 68 of IAS 37. We understand the IFRS IC’s view that IAS 37 is not completely clear. However, this agenda decision is likely to create further diversity in practice, particularly when the guidance in IAS 11 is replaced by IFRS 15. We also believe that the question satisfies the agenda criteria stipulated in paragraph 5.16 of the Due Process Handbook. We therefore encourage the IFRS IC to re-consider its decision and add this issue to its agenda with the objective of providing definitive guidance on the interpretation of IAS 37.
If you have any questions in relation to this letter, please do not hesitate to contact Henry Daubeney, PwC Head of Reporting and Chief Accountant (+44 207 804 2160).