The detailed disclosure requirements of provisions, contingent liabilities and contingent assets are set out in IAS 37.

Some disclosure of provisions and contingent liabilities should be made by class. In order to determine which provisions can be aggregated together 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 IAS 37’s disclosure requirements.

Aggregating provisions in different classes for disclosure Provisions could be aggregated by class, for disclosure purposes, if the nature of the item is sufficiently similar. Examples of different classes of provision include restructuring, integration of acquisitions, warranties, and environmental liabilities. It might, for example, be appropriate to treat warranties for different products as a single class, but IAS 37 comments that it would not be appropriate to treat as a single class amounts relating to normal warranties and amounts that are subject to legal proceedings. Also, the materiality of each class needs to be considered, and some aggregation might be necessary where provisions are individually immaterial.

Where any of the information required to be disclosed by IAS 37 is not given because it is not practicable to do so, that fact must be stated.

What is meant by ‘not practicable? The standard does not elaborate on what is meant by ‘not practicable’ for IAS 37 disclosure purposes. There might be situations where it is not possible to ascertain what uncertainties relate to the timing of a provision, or perhaps difficulties with estimating the financial effect. But the IASB’s intention is that entities should use their best efforts to determine all of the required information. Some information concerning provisions and contingent liabilities and assets (for example, litigation and litigation recoveries, particularly through insurance) might be very sensitive, and full disclosure could prejudice the outcome of a particular case. The IASB has acknowledged this and concedes that, in extremely rare cases, disclosure of some or all of the information required by IAS 37 might seriously prejudice 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 situations, it is accepted that an entity need not provide as much disclosure. However, it needs to disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed.

Provisions

For each class of provision, the following should be disclosed (comparative information is not required):

• the carrying amount at the beginning and end of the period;
• additional provisions recognised in the period, including increases to existing provisions;
• amounts used (i.e. incurred and charged against the provision) during the period;
• unused amounts reversed during the period; and
• 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.

The following should also be disclosed for each class of provision:

• a brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits;
• an indication of the uncertainties about the amount or timing of those outflows. When necessary to provide adequate information, the entity should disclose the major assumptions made concerning future events; and
• the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement.

In determining which provisions 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 outlined above concerning disclosure of the nature of and uncertainties surrounding such liabilities.

When a provision meets the definition of a financial instrument in IAS 32 but is accounted for under IAS 37 because it is not within the scope of IFRS 9 (or, for entities that have not yet adopted IFRS 9, IAS 39), the disclosure requirements of IFRS 7 will apply in addition to those of IAS 37.

Contingent liabilities

For each class of contingent liability (unless the possibility of an outflow in settlement is remote), a brief description of the nature of the contingent liability should be provided. The following information should also be disclosed, if practicable:

• an estimate of its financial effect (based on the measurement requirements of IAS 37);
• an indication of the uncertainties relating to the amount or timing of any outflow; and
• the possibility of any reimbursement.

In determining which 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 outlined above with respect to disclosure of the nature of and uncertainties surrounding such items.

When a provision and a contingent liability arise from the same set of circumstances, the reporting entity should make the required disclosures in a way that clearly shows the link between the provision and the contingent liability.

Contingent assets

When an inflow of economic benefits is probable, the entity should disclose a brief description of the nature of the contingent assets at the end of the reporting period and, if practicable, an estimate of their financial effect (based on the measurement requirements of IAS 37), taking care to avoid giving misleading indications of the likelihood of income arising.

Exemptions from disclosure requirements

Exemption applies to disclosure of contingent liabilities and contingent assets

When any of the information required in respect of contingent liabilities and contingent assets, as set out, is not disclosed because it is not practicable to do so, that fact should be stated.

Exemption applies to all disclosures

In extremely rare cases, it is conceivable that some or all of the disclosures required by IAS 37 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, the reporting entity need not disclose the information, but it should disclose the general nature of the dispute, together with the fact that the information has not been disclosed and the reason why.