With IAS 371, IFRS has one-stop guidance to account for provisions, contingent assets and contingent liabilities. Therefore, there is a single recognition, measurement and disclosure model for obligations such as legal claims and litigation, onerous contracts, restructuring2, assurance warranties, non-income tax exposures, environmental provisions and decommissioning.
This contrasts with US GAAP, which has a number of Codification topics that, in combination, cover the same overall scope as IAS 37. For example, separate Codification topics deal with asset retirement obligations, environmental obligations, exit and disposal obligations and guarantees. After these exclusions, many loss contingencies and gain contingencies fall under the general model in ASC 450.3 It is this general model that is the subject of this article, focusing on legal claims.