EFRAG Issues Feedback Statement on the IASB’s Exposure Draft Provisions – Targeted Improvements
The Feedback Statement provides a summary of the feedback received from stakeholders, including comments on EFRAG’s draft comment letter. It also explains how this input was used to inform the final position in EFRAG's Final Comment Letter (FCL), submitted to the IASB on 1 April 2025 in response to the IASB’s Exposure Draft IASB/ED/2024/8 Provisions—Targeted Improvements (the ED).
The ED proposed amendments to three aspects of IAS 37 Provisions, Contingent Liabilities and Contingent Assets:
The criteria for recognising a provision - specifically, the requirement for the entity to have a present obligation arising from a past event (the present obligation recognition criterion);
The requirements for measuring a provision related to the costs an entity includes when estimating future expenditure required to settle its present obligation;
The requirements for measuring a provision related to the discount rate an entity uses to bring that future expenditure to its present value.
Based on the feedback received, EFRAG observed in its letter that, while the proposed changes to the present obligation criterion clarify some aspects of provisions, they also introduce ambiguity and increase reliance on judgment, potentially raising compliance costs.
EFRAG welcomed the withdrawal of IFRIC 21 but noted that the exposure draft does not fully address prior concerns.
EFRAG supported the proposed improvements to the measurement of provisions, particularly the clarification of required expenditure and the specification of a risk-free discount rate. However, EFRAG also identified areas where further guidance is needed.
EFRAG suggested that the IASB could finalise the measurement amendments more quickly than those related to the present obligation recognition criterion.
A detailed analysis of the feedback received for each of the ED's questions is presented in the Feedback Statement.