The core difference in one table
The single sentence version: IAS 37 recognises provisions earlier, at a higher amount, and discounted; ASC 450 recognises them later, at a lower amount, and undiscounted. Every practical difference between the two frameworks flows from three design choices — where the probability threshold sits, how a range of outcomes is measured, and whether the time value of money is reflected. IAS 37 Provisions, Contingent Liabilities and Contingent Assets is a single comprehensive standard; ASC 450 Contingencies is deliberately narrower and leans on other Topics (ASC 420 for exit costs, ASC 330 for purchase commitments, ASC 460 for guarantees) for anything specialised.
| Issue | IAS 37 (IFRS) | ASC 450 (US GAAP) |
|---|---|---|
| Recognition threshold | "Probable" = more likely than not, >50% (para 23) | "Probable" = likely to occur, a higher bar in practice (~70–80%) (ASC 450-20-25-2) |
| Recognition criteria | Present obligation + probable outflow + reliable estimate (para 14) | Probable loss + reasonably estimable (ASC 450-20-25-2) |
| Single obligation | Best estimate = most likely outcome (para 40) | Best estimate within range, else low end (ASC 450-20-30-1) |
| Range, no best point | Midpoint of the range (para 39) | Low end of the range (ASC 450-20-30-1) |
| Discounting | Required where material (para 45) | Generally not permitted unless timing is fixed/determinable |
| Onerous contracts | Explicit provision (para 66–69) | No general model; specific Topics only |
| Restructuring | Constructive obligation on announcement (para 72) | Cost-by-cost under ASC 420 |
| Contingent asset | Disclose if probable; recognise if virtually certain (para 31–35) | Not recognised until realised (ASC 450-30) |
When is a provision recognised?
A provision is recognised only when all the recognition criteria are met — and the criteria themselves are the first place the two frameworks diverge. Under IAS 37 para 14, an entity recognises a provision when, and only when: (a) it has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount. If any one condition fails, no provision is recognised — the item is either a contingent liability (disclosed) or nothing at all.
Under ASC 450-20-25-2, an estimated loss from a loss contingency is accrued (by a charge to income) only if both conditions are met: information available before the financial statements are issued indicates it is probable that a liability had been incurred at the balance sheet date, and the amount of loss can be reasonably estimated. The structure looks parallel, but two words carry all the weight.
The probability ladder
Both standards sort obligations onto a likelihood ladder, and the same rung is labelled differently:
| Likelihood | IAS 37 term & treatment | ASC 450 term & treatment |
|---|---|---|
| Virtually certain | Recognise (asset side becomes non-contingent) | Accrue |
| Probable / likely | >50%: recognise provision (para 23) | Higher bar (~70–80%): accrue (ASC 450-20-25-2) |
| Possible / reasonably possible | Disclose contingent liability (para 86) | Disclose contingency (ASC 450-20-50-3) |
| Remote | No disclosure required | No accrual, generally no disclosure |
Why the gap matters. IAS 37 para 23 fixes "probable" at more likely than not — a clean 50% line. ASC 450 never quantifies "probable," but decades of US practice and SEC comment interpret it as a materially higher hurdle, commonly cited as around 70% to 80%. A lawsuit that outside counsel rates a 60% chance of loss is therefore a recognised provision under IFRS and a disclosure-only contingency under US GAAP. This single interpretive gap explains why IFRS balance sheets carry more, and earlier, provisions than US GAAP ones for the same litigation portfolio.
Present obligation and the constructive obligation twist. IAS 37 para 10 recognises two obligation types: a legal obligation (from contract, legislation or other law) and a constructive obligation, which arises when an entity's past practice or published policy creates a valid expectation in others that it will accept certain responsibilities (para 10). US GAAP has no formal "constructive obligation" concept in ASC 450; it looks for a liability that "had been incurred." This is why restructuring and environmental clean-up commitments can crystallise earlier under IFRS.
How is a provision measured?
Once recognition is cleared, the measurement rules pull the two numbers apart again. IAS 37 para 36 requires the amount recognised to be the best estimate of the expenditure required to settle the present obligation at the reporting date. How you arrive at that best estimate depends on the population:
- Large population of items (e.g. warranty claims across thousands of units): use the expected value — probability-weighted across all possible outcomes (para 39).
- Single obligation (e.g. one lawsuit): the best estimate is generally the most likely outcome, but the entity considers other possible outcomes (para 40).
- Continuous range of equally likely outcomes with no single best point: use the midpoint of the range (para 39).
ASC 450-20-30-1 takes a deliberately more conservative path for ranges. When some amount within a range of loss is a better estimate than any other, that amount is accrued. But when no amount within the range is a better estimate than any other, the entity accrues the low end of the range (with the excess up to the high end disclosed). So on identical "£4m to £12m, all equally likely" facts, IFRS books the £8m midpoint and US GAAP books the £4m minimum — a £4m difference before any discounting.
Discounting: present value vs face value
IAS 37 para 45 requires that, where the effect of the time value of money is material, the provision be measured at the present value of the expenditures expected to settle the obligation. Para 47 specifies a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability (risks already reflected in the cash flow estimate must not be double-counted). The unwinding of that discount each period is recognised as a finance cost, not an operating expense — a presentation point auditors frequently see mislabelled.
ASC 450 contains no general discounting requirement. A US GAAP loss contingency is typically accrued at its undiscounted amount. Discounting is permitted only in narrow cases where the amount and timing of payments are fixed or reliably determinable (environmental remediation under ASC 410-30 is the classic example). The practical effect: for a long-dated obligation, the IFRS provision starts lower (discounted) but grows each year through discount unwind, while the US GAAP accrual sits flat at face value. Over a multi-year settlement — think a decommissioning liability or a structured legal settlement — the two profiles look entirely different.
Onerous contracts
An onerous contract is one in which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received. This is one of the sharpest IFRS/US GAAP divergences, because IAS 37 has an explicit, general onerous-contract model and US GAAP does not.
IAS 37 para 66 requires that if an entity has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. Para 68 defines the unavoidable costs as the lower of (a) the cost of fulfilling the contract and (b) any compensation or penalties arising from failure to fulfil it — the "least net cost of exiting." Para 69 adds that any impairment loss on assets dedicated to the contract is recognised first, before the onerous provision is measured. Following the IASB's 2020 amendment, the "costs of fulfilling" a contract for this test comprise both incremental costs (e.g. direct labour and materials) and an allocation of other directly-related costs (e.g. depreciation of equipment used on the contract).
US GAAP has no equivalent single standard. There is no general concept of an onerous executory contract in ASC 450. Instead, losses are addressed only where a specific Topic applies:
- Firm purchase commitments for inventory — a loss on a firm, non-cancellable purchase commitment is recognised under ASC 330-10-35-17, applying lower-of-cost-or-market logic to the committed quantity.
- Long-term and construction-type contracts — an expected loss on a contract is recognised immediately under ASC 606 (and legacy ASC 605-35).
- Leases — an onerous operating lease is not provided for directly; instead the right-of-use asset is tested for impairment under ASC 360 / ASC 842.
The gap: a purely executory service contract — say an outsourced IT or facilities contract that has turned loss-making — generates an immediate provision under IAS 37 para 66 but nothing under US GAAP until the loss is actually incurred period by period. That is a genuine timing and balance-sheet difference, not a presentation nuance.
Restructuring provisions
Restructuring is where the constructive-obligation concept does its most visible work — and where IFRS and US GAAP most often recognise the same costs in different periods. IAS 37 para 70 defines a restructuring as a programme planned and controlled by management that materially changes the scope of the business or the manner in which it is conducted (sale or termination of a line of business, closure of locations, changes in management structure, fundamental reorganisations).
IAS 37 para 72 sets the recognition trigger: a constructive obligation to restructure arises only when the entity (a) has a detailed formal plan identifying at least the business/part concerned, the principal locations, the location, function and approximate number of employees to be compensated, the expenditures to be undertaken and 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 the plan or announcing its main features to those affected. A board decision alone is not enough (para 75) — there must be an announcement or the start of implementation before the reporting date.
What cannot go into an IAS 37 restructuring provision:
- Costs of retraining or relocating continuing staff (para 81) — these relate to the future conduct of the business.
- Marketing or investment in new systems and distribution networks (para 81).
- Future operating losses (para 63) — never provided for; they relate to future events.
- Only directly attributable expenditures that are both necessarily entailed by the restructuring and not associated with ongoing activities qualify (para 80).
US GAAP — ASC 420 Exit or Disposal Cost Obligations. ASC 420 rejects the "commit to a plan" trigger that pre-2002 US GAAP used and instead requires each cost to meet its own recognition criteria. One-time employee termination benefits are recognised when the plan is communicated to employees (and, if future service is required to receive them, ratably over that service period); contract termination costs when the entity terminates the contract; and other associated costs (e.g. moving, consolidation) when they are incurred. The practical result is that US GAAP restructuring charges are often recognised later and in tranches, whereas IAS 37 groups the qualifying costs together at announcement. Two companies closing an identical plant on the same day can report the charge in different quarters.
Contingent liabilities and assets: disclose or recognise?
The dividing line is recognition versus disclosure, and IAS 37 draws it precisely. A contingent liability (IAS 37 para 10) is either (a) a possible obligation whose existence will be confirmed only by uncertain future events not wholly within the entity's control, or (b) a present obligation that is not recognised because an outflow is not probable or the amount cannot be measured reliably. Para 27 is categorical: an entity shall not recognise a contingent liability. Instead, para 86 requires disclosure — a brief description of the nature, an estimate of the financial effect, an indication of uncertainties, and the possibility of any reimbursement — unless the possibility of outflow is remote.
ASC 450-20-50-3 to 50-4 mirrors this on the liability side: a loss contingency that is at least reasonably possible (but not accrued) is disclosed, including the nature of the contingency and an estimate of the possible loss or range, or a statement that such an estimate cannot be made.
Contingent assets — the asymmetry
Both frameworks are deliberately asymmetric, refusing to let entities book gains as readily as losses. IAS 37 para 31 prohibits recognising a contingent asset. Para 34 permits disclosure where an inflow of economic benefits is probable, and para 33 allows recognition only when realisation of the income is virtually certain — at which point the asset is no longer contingent. ASC 450-30-25-1 is if anything stricter in practice: gain contingencies are not reflected in the accounts, since to do so might recognise revenue before it is realised; disclosure is made but the entity must avoid misleading implications about the likelihood of realisation. So an insurance recovery or a favourable lawsuit is generally kept out of the numbers under both frameworks until the money is effectively in hand.
Worked example 1: warranty and litigation — the same facts, two answers
This example shows both a point of convergence (warranties) and the headline point of divergence (a litigation range), with journal entries under each framework.
Facts. TechCo Ltd prepares its 31 December 2026 accounts. Two obligations are in play:
- (A) Product warranty. TechCo sold 100,000 units in 2026, each carrying a 12-month assurance warranty. Historical data: 85% of units need no repair, 12% need a minor repair costing £50, 3% need a major repair costing £300. Claims are settled within 12 months (discounting immaterial).
- (B) Litigation. A customer is suing TechCo. External counsel advises a loss is probable and expects the court to award somewhere between £4m and £12m in about 3 years, with no point in that range more likely than any other. A pre-tax risk-adjusted discount rate of 5% is appropriate.
(A) Warranty — expected value (both frameworks agree). Warranties are a large population, so IAS 37 para 39 uses expected value; US GAAP treats an assurance warranty as a probable, estimable loss contingency accrued under ASC 450-20 using the same historical-rate logic.
- Per-unit expected cost = (0.85 × £0) + (0.12 × £50) + (0.03 × £300) = £0 + £6 + £9 = £15
- Provision = £15 × 100,000 units = £1,500,000 (no discount — settled within 12 months)
| Warranty — both IAS 37 and ASC 450 | Dr | Cr |
|---|---|---|
| Warranty expense (P&L) | £1,500,000 | |
| Warranty provision (liability) | £1,500,000 |
(B) Litigation — where the frameworks part ways.
IAS 37. A continuous range of equally likely outcomes → midpoint (para 39) = (£4m + £12m) / 2 = £8,000,000. Because settlement is ~3 years away and the effect is material, discount to present value (para 45) at 5%: £8,000,000 ÷ (1.05)³ = £8,000,000 ÷ 1.157625 = £6,910,700 (rounded).
| Litigation — IAS 37 (initial recognition) | Dr | Cr |
|---|---|---|
| Legal / litigation expense (P&L) | £6,910,700 | |
| Provision for litigation (liability) | £6,910,700 |
In 2027 the discount unwinds by £6,910,700 × 5% = £345,535, recognised as a finance cost (para 47), lifting the provision toward its £8m undiscounted settlement value:
| Litigation — IAS 37 (year-1 unwind) | Dr | Cr |
|---|---|---|
| Finance cost (P&L) | £345,535 | |
| Provision for litigation (liability) | £345,535 |
ASC 450. No single amount in the range is better than any other → accrue the low end (ASC 450-20-30-1) = £4,000,000, undiscounted. The excess up to £12m is disclosed, not accrued. (If US counsel rated the loss below the higher "probable" bar, US GAAP might accrue nothing and disclose the entire matter.)
| Litigation — ASC 450 | Dr | Cr |
|---|---|---|
| Litigation loss (P&L) | £4,000,000 | |
| Accrued liability | £4,000,000 |
The bottom line. Same lawsuit, same evidence: IFRS carries a £6.91m provision (growing to £8m through unwind); US GAAP carries a £4m accrual (flat). That is a £2.9m difference in liabilities and pre-tax profit on day one, driven entirely by the range convention and discounting — before you even reach the probability-threshold gap.
Worked example 2: onerous contract
This example isolates the onerous-contract divergence, again with journal entries.
Facts. On 31 December 2026, LogiCo has a non-cancellable 2-year contract to purchase 10,000 units per year of a component at a fixed £100/unit (£1,000,000 per year). Demand has collapsed; LogiCo can only use or on-sell the components for £70/unit. There is no penalty clause that would make exiting cheaper (a hypothetical exit penalty would be £750,000, which is higher than the cost of fulfilling). A 5% discount rate applies. The components are pure inputs; there is no dedicated equipment to impair.
IAS 37 (para 66–68). The contract is onerous: unavoidable cost of fulfilling exceeds the benefit. Net loss per unit = £100 cost − £70 benefit = £30. Annual loss = £30 × 10,000 = £300,000 for each of 2 years. Unavoidable cost is the lower of fulfilling (£600,000 total) and exiting (£750,000) → £600,000 (para 68). Because the outflows span 2 years and are material, discount at 5%:
- Year 1: £300,000 ÷ 1.05 = £285,714
- Year 2: £300,000 ÷ (1.05)² = £272,109
- Onerous contract provision = £557,823
| Onerous contract — IAS 37 | Dr | Cr |
|---|---|---|
| Onerous contract expense (P&L) | £557,823 | |
| Provision for onerous contract (liability) | £557,823 |
US GAAP. There is no general onerous-contract provision. The correct US GAAP question is "which specific Topic applies?" Here the contract is a firm, non-cancellable purchase commitment for inventory, so ASC 330-10-35-17 requires recognising the loss on the committed purchase using lower-of-cost-or-market logic: the £30/unit shortfall on 20,000 committed units = £600,000, recognised undiscounted.
| Firm purchase commitment loss — ASC 330 | Dr | Cr |
|---|---|---|
| Loss on purchase commitment (P&L) | £600,000 | |
| Accrued loss on purchase commitment | £600,000 |
The bottom line. On these facts the two frameworks happen to reach a similar total (£557,823 discounted vs £600,000 undiscounted), but for entirely different reasons — IAS 37 because there is a general onerous-contract standard, US GAAP only because a specific inventory Topic caught it. Change the fact pattern to a loss-making service contract with no inventory, lease or construction element, and IAS 37 still provides £557,823 while US GAAP recognises nothing until the loss is incurred. The lesson: never assume US GAAP has an onerous-contract answer — you must identify the applicable Topic first.
Disclosure requirements
Recognition is only half the standard; IAS 37 devotes as much attention to disclosure. For each class of provision, IAS 37 para 84 requires a reconciliation showing the carrying amount at the start and end of the period, additional provisions made, amounts used, unused amounts reversed, and the increase from discount unwind. Para 85 requires a description of the nature of the obligation and the expected timing, an indication of the uncertainties about amount or timing, and the amount of any expected reimbursement. Comparatives are not required for this reconciliation (para 84).
For contingent liabilities, para 86 requires — unless outflow is remote — a brief description of the nature, and where practicable an estimate of the financial effect, an indication of the uncertainties, and the possibility of any reimbursement. For contingent assets, para 89 requires a description and, where practicable, an estimate of the financial effect where an inflow is probable. Para 92 provides a narrow "seriously prejudicial" exemption: in extremely rare cases, disclosure of some detail can be omitted if it would seriously prejudice the entity's position in a dispute — but the entity must still disclose the general nature of the dispute and the fact that, and reason why, the information has not been disclosed. Volkswagen relies on exactly this exemption for parts of its diesel litigation (see case studies).
US GAAP disclosure lives in ASC 450-20-50: accrued loss contingencies are disclosed where necessary for the statements not to be misleading, and reasonably possible losses (or additional losses beyond amounts accrued) are disclosed with the nature of the contingency and an estimate of the possible loss or range, or a statement that an estimate cannot be made. SEC registrants face additional scrutiny under Item 103 (legal proceedings) and MD&A.
Red flags for auditors
Provisions are among the highest-judgement, highest-risk areas in any audit, squarely within ISA 540 Auditing Accounting Estimates and Related Disclosures and, for litigation, ISA 501 Audit Evidence — Specific Considerations for Selected Items. Four red flags recur:
| Red flag | What you might find | Procedure |
|---|---|---|
| 1. Management bias / "big bath" reserving | A large restructuring or litigation provision raised in a poor year and quietly reversed the next — classic income smoothing or "cookie-jar" reserving. | Perform the ISA 540 para 9 retrospective review of prior-period provisions against actual outcomes. A pattern of over-provision then release is a bias indicator; extend testing and consider the effect on other estimates. |
| 2. Completeness of provisions / unrecorded litigation | Claims discussed in board minutes or paid through legal-expense accounts but with no provision or disclosure — a completeness failure. | Apply ISA 501 para 10–11: send external legal confirmation letters (lawyer's letters) to the entity's counsel, read board and committee minutes, inspect legal invoices and correspondence, and inquire of in-house legal and management. |
| 3. Discount-rate manipulation | An inflated pre-tax discount rate, or double-counting of risk in both cash flows and rate, used to understate an IAS 37 para 45–47 provision. | Under ISA 540 evaluate the rate against observable market data, check that risks are reflected once (not twice), recompute the present value, and where needed use an auditor's expert (ISA 620). |
| 4. Restructuring recognised too early / non-qualifying costs | A provision booked on a board decision alone with no pre-year-end announcement (fails IAS 37 para 72), or including future operating losses (para 63) or retraining/relocation costs (para 81). | Obtain the dated board approval and evidence of public/employee announcement before the reporting date; recompute the provision stripping out non-qualifying costs; confirm cut-off. |
Across all four, the auditor's stance under ISA 540 is one of professional scepticism about the direction of any bias — provisions can be both understated (to flatter profit) and overstated (to smooth future results), and the audit response differs accordingly.
Real-life case studies
Three large, well-documented disclosures show the mechanics in the wild — two under IAS 37, one under ASC 450.
BP — Deepwater Horizon (IAS 37)
BP, an IFRS reporter, provides the textbook example of a long-dated, discounted provision built up over years. Following the 2010 Gulf of Mexico oil spill, BP recognised escalating provisions for clean-up, penalties and claims. Its 2015 settlement with US federal and state governments was announced at up to $18.7bn, payable over roughly 18 years — precisely the kind of long-tail obligation IAS 37 para 45 requires to be discounted to present value, with the discount unwinding as a finance cost each year. By 2016 BP disclosed a cumulative pre-tax charge of about $61.6bn ($44.0bn after tax) for the incident, and further charges in 2017–2018 pushed the cumulative total past $65bn. The case illustrates estimation uncertainty (the provision was revised many times as facts emerged) and the P&L volatility that IAS 37 remeasurement creates. (Sources: BP press releases and SEC Form 6-K filings, 2015–2018.)
Volkswagen — dieselgate (IAS 37, and the para 92 exemption)
Volkswagen, also an IFRS reporter, shows both recognition and the disclosure boundary. After the 2015 emissions scandal VW recognised very large provisions for recalls, fines and litigation. Crucially, its more recent annual reports disclose additional contingent liabilities of around €4.0bn — of which roughly €3.8bn relates to investor lawsuits in Germany — that are disclosed but not recognised because the recognition threshold is not met. VW also expressly invokes the IAS 37 para 92 "seriously prejudicial" exemption, stating that in line with IAS 37.92 it makes no further estimate of financial effect or timing where doing so could compromise ongoing proceedings. This is a clean, real-world illustration of the provision-versus-contingent-liability divide and of the rarely-used prejudicial-disclosure carve-out. (Source: Volkswagen Group Annual Report 2024, legal risks and contingent liabilities notes.)
Johnson & Johnson — talc litigation (ASC 450)
On the US GAAP side, Johnson & Johnson's talc litigation reserve shows ASC 450-20 in action — and one of its exceptions. J&J's 2024 Form 10-K discloses a reserve to resolve talc claims with a total present value of approximately $11.6bn, and states it records accruals for loss contingencies "when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated," expressly citing ASC 450-20. Notably, the reserve is stated on a present value basis — one of the narrow situations where US GAAP discounting is acceptable because the payment stream is sufficiently determinable. J&J also states that for these matters it is "unable to estimate the possible loss or range of loss beyond the amounts accrued," the ASC 450-20-50 disclosure formula for unquantifiable exposure. (Source: Johnson & Johnson Form 10-K, fiscal year ended 29 December 2024.)
Modelling a provision or contingency across both frameworks?
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Compare Standards →FAQs
Is it IAS 37 or IFRS 37?
It is IAS 37 Provisions, Contingent Liabilities and Contingent Assets. There is no standard called "IFRS 37." Provisions under international standards remain governed by IAS 37; the US GAAP equivalent is ASC 450 Contingencies.
What is the difference between a provision and a contingent liability?
A provision meets all three IAS 37 para 14 criteria (present obligation + probable outflow + reliable estimate) and is recognised on the balance sheet. A contingent liability fails at least one test — the obligation is only possible, the outflow is not probable, or it cannot be measured reliably — so under IAS 37 para 27–28 it is disclosed in the notes but not recognised.
Does "probable" mean the same thing under IAS 37 and ASC 450?
No. IAS 37 para 23 defines probable as more likely than not — over 50%. ASC 450-20 defines probable as "likely to occur," interpreted in US practice as a materially higher bar, commonly cited around 70–80%. A lawsuit rated 60% likely is a recognised IFRS provision but a disclosure-only US GAAP contingency.
When do you use the midpoint of a range versus the low end?
IAS 37 para 39 uses the midpoint where there is a continuous range of equally likely outcomes with no better estimate. ASC 450-20-30-1 uses the low end of the range in the same situation. This structural difference can leave an IFRS provision meaningfully higher than the equivalent US GAAP accrual on identical facts.
Do you discount provisions under US GAAP?
Generally no. IAS 37 para 45 requires discounting where the time value of money is material, using a pre-tax risk-adjusted rate (para 47). ASC 450 does not require it; a US GAAP loss contingency is usually accrued undiscounted, with discounting permitted only where amounts and timing are fixed or reliably determinable (e.g. environmental remediation under ASC 410-30).
Does US GAAP have onerous contract provisions?
Not as a general model. IAS 37 para 66–69 provides for any onerous contract. US GAAP addresses only specific types — firm inventory purchase commitments (ASC 330-10-35), loss-making construction/long-term contracts (ASC 606), and right-of-use lease impairment (ASC 842/360). A loss-making pure service contract is provided for under IFRS but not under US GAAP until the loss is incurred.
Can you recognise a contingent asset?
No. IAS 37 para 31–33 prohibits recognition; a contingent asset is disclosed only when an inflow is probable and recognised only when it becomes virtually certain (at which point it is no longer contingent). ASC 450-30 keeps gain contingencies out of the accounts until realised.
How do restructuring provisions differ between IAS 37 and ASC 420?
IAS 37 para 72 recognises the qualifying costs together once a detailed formal plan exists and a valid expectation has been created (usually on announcement) — a constructive obligation. ASC 420 requires each cost to meet its own criteria: termination benefits when communicated to employees, other exit costs when incurred. US GAAP therefore tends to recognise restructuring later and in stages.
What audit evidence supports a litigation provision?
Under ISA 501 para 10–11 the auditor obtains external legal confirmation letters (lawyer's letters), reads board and committee minutes, inspects correspondence and legal-expense accounts, and inquires of management and in-house legal. Under ISA 540 the auditor evaluates the estimate and discount rate, tests assumptions against external evidence, and performs a retrospective review of prior provisions to detect bias.
This guide is a technical summary for educational purposes and is not a substitute for the full text of IAS 37 and ASC 450, applicable legal advice, or a considered accounting judgement on your specific facts. Paragraph references are to IAS 37, the ASC 450 Codification, and the relevant ISAs as in force at the date of review. Company figures are drawn from the cited public filings and press releases; always consult the primary source before relying on any number.