In April 2001, the IASB finally adopted IAS 37 Provisions, Contingent Liabilities, and Contingent Assets to prevent entities from using provisions for creative accounting purposes. For example, it was common for entities to make material provisions for items such as restructuring costs, future losses or expected future expenditures on decommissioning of oil wells or even repairs and maintenance of assets for the purpose of reducing profits in the periods in which they were recognised.

Required:

(a) Critically evaluate the criteria that need to be satisfied before a provision is recognised under IAS 37.

(15 marks)

(b) Critically evaluate the general principles that IAS 37 applies to the measurement of provisions.(9 marks)

(c) How is a provision defined under IAS 37?

(1 mark)