Report: Onerous Contracts - Cost of Fulfilling a Contract (IAS 37)
VerifiedAdded on 2022/11/14
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Report
AI Summary
This report analyzes a response letter concerning the proposed amendments to IAS 37 related to onerous contracts, specifically in the context of a manufacturer of goods. The letter raises questions about the clarity of the standard regarding the inclusion of indirect costs of production when determining the cost of fulfilling a contract. The author agrees with the specification of direct costs, including manufacturing costs as per IAS 2, but emphasizes the need for explicit mention of systematic allocation of indirect costs to avoid diversity in practice. The report also references an article from The Australian regarding ASIC's queries on accounting treatments, highlighting revenue recognition and asset impairment as key areas of concern. The report provides a critical analysis of the proposed amendments, emphasizing the importance of clear guidance on cost allocation for accurate financial reporting.