EFRAG’s Draft Comment Letter on the IASB ED Provisions—Targeted Improvements

EFRAG has published its Draft Comment Letter (‘DCL’) on the IASB's Exposure Draft IASB/ED/2024/8 Provisions—Targeted Improvements (Proposed amendments to IAS 37) (the 'ED'). Comments on EFRAG’s DCL are requested by 25 February 2025 (EFRAG has requested the IASB to extend its comment period on the ED. Should the IASB agree, EFRAG will similarly extend its comment period on the DCL).

The DCL includes questions to constituents on the most significant aspects of the proposals which EFRAG might need to consider further before finalising its comment letter to the IASB on the ED.

In the DCL, EFRAG’s tentative view is that the proposals aiming at clarifying the current requirements on when an entity has a present obligation as a result of a past event are overall useful. However, EFRAG acknowledges that there are arguments both in favour and against the proposed requirements of the ED resulting in some provisions being recognised earlier than currently done.

EFRAG tentatively supports the proposal to specify that the costs to settle a present obligation comprise the costs that relate directly to that obligation.

Overall, EFRAG generally supports the IASB’s efforts to reduce diversity in practice by specifying that the rate an entity uses to discount the future expenditure to its present value is a risk-free rate and should not include non-performance risk.

EFRAG makes further suggestions to enhance the clarity of the proposals and comments on the proposed transition requirements, disclosures for subsidiaries without public accountability and the proposed amendments to the implementation guidance of IAS 37.

Please submit your comment letters using this form.

During the consultation period, EFRAG will perform additional outreach in order to better understand the implications of the proposals.