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The International Accounting Standards Board recently published an Exposure Draft, Onerous Contracts – Cost of Fulfilling a Contract, which proposes amendments to International Accounting Standard 37, Provisions, Contingent Liabilities and Contingent Assets. The amendments are intended to clarify which costs to include in determining the cost of fulfilling a contract for the purpose of assessing whether a contract is onerous (i.e., one in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it). If finalized, the amendments would specify that the costs of fulfilling a contract include both incremental costs, such as the costs of materials, and an allocation of other costs directly related to the contract, such as the depreciation charge for equipment the company uses to fulfill contracts.
The Exposure Draft is available for comment until April 15, 2019.
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