Objective
The objective of this Standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount.
Scope
1. This Standard shall be applied by all entities in accounting for provisions, contingent liabilities and contingent assets, except:
(a) those resulting from executory contracts, except where the contract is onerous;
(b) [...]
(c) those covered by another Standard.
Editorial note: Amended by improvements project standard IAS 39 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "This Standard should be applied by all enterprises in accounting for provisions, contingent liabilities and contingent assets, except: (a) those resulting from financial instruments that are carried at fair value; (b) those resulting from executory contracts, except where the contract is onerous; (c) those arising in insurance enterprises from contracts with policyholders; and (d) those covered by another International Accounting Standard."

Sub-paragraph (b) deleted by IFRS 4 with effect for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies this IFRS for an earlier period, it shall disclose that fact. Previously "those arising in insurance entities from contracts with policyholders; and".

22 When the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
Effective Date
23 The Standard becomes operative for annual financial statements covering periods beginning on or after 1 July 1999. Earlier application is encouraged.
International Accounting Standard 37 Provisions, Contingent Liabilities and Contingent Assets (IAS 37) is set out in paragraphs 1-96 and Appendices A-D. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 37 should be read in the context of its objective, the Preface to International Financial Reporting Standards and the Framework for the Preparation and Presentation of Financial Statements. These provide a basis for selecting and applying accounting policies in the absence of explicit guidance.

19 An enterprise should not recognise a contingent liability. An enterprise should disclose a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent Assets
20 The Standard defines a contingent asset as a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. An example is a claim that an enterprise is pursuing through legal processes, where the outcome is uncertain.
21 An enterprise should not recognise a contingent asset. A contingent asset should be disclosed where an inflow of economic benefits is probable.

18 The Standard defines a contingent liability as:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
Editorial note: First paragraph substituted by improvements project standard IAS 10 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "The Standard supersedes the parts of IAS 10, Contingencies and Events Occurring After the Balance Sheet Date, that deal with contingencies. The Standard defines a contingent liability as:"

17 A restructuring provision should include only the direct expenditures arising from the restructuring, which are those that are both:
(a) necessarily entailed by the restructuring; and
(b) not associated with the ongoing activities of the enterprise. Thus, a restructuring provision does not include such costs as: retraining or relocating continuing staff; marketing; or investment in new systems and distribution networks.
Contingent Liabilities

15 A management or board decision to restructure does not give rise to a constructive obligation at the balance sheet date unless the enterprise has, before the balance sheet date:
(a) started to implement the restructuring plan; or
(b) communicated the restructuring plan to those affected by it in a sufficiently specific manner to raise a valid expectation in them that the enterprise will carry out the restructuring.
16 Where a restructuring involves the sale of an operation, no obligation arises for the sale until the enterprise is committed to the sale, i.e. there is a binding sale agreement.

14 A provision for restructuring costs is recognised only when the general recognition criteria for provisions are met. In this context, a constructive obligation to restructure arises only when an enterprise:
(a) has a detailed formal plan for the restructuring identifying at least:
(i) the business or part of a business concerned;
(ii) the principal locations affected;
(iii) the location, function, and approximate number of employees who will be compensated for terminating their services;
(iv) the expenditures that will be undertaken; and
(v) when the plan will be implemented; and
(b) has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

11 Provisions should not be recognised for future operating losses. An expectation of future operating losses is an indication that certain assets of the operation may be impaired. In this case, an enterprise tests these assets for impairment under IAS 36, Impairment of Assets.
12 If an enterprise has a contract that is onerous, the present obligation under the contract should be recognised and measured as a provision. An onerous contract is one in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
13 The Standard defines a restructuring as a programme that is planned and controlled by management, and materially changes either:
(a) the scope of a business undertaken by an enterprise; or
(b) the manner in which that business is conducted.

9   This Standard applies to provisions for restructurings (including discontinued operations). When a restructuring meets the definition of a discontinued operation, additional disclosures may be required by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Editorial note: Substituted by IFRS 5 with effect for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies the IFRS for a period beginning before 1 January 2005, it shall disclose that fact. Previously "A provision should be used only for expenditures for which the provision was originally recognised.".
Provisions - Specific Applications
10 The Standard explains how the general recognition and measurement requirements for provisions should be applied in three specific cases: future operating losses; onerous contracts; and restructurings.