IAS 37 (as adopted by EU) · IAASA / CRO

IAS 37 Provision Calculator
Ireland

IAS 37 provision assessment with Ireland-specific regulatory guidance, IAASA / CRO expectations, and local legal framework considerations.

Obligation Type

Present Obligation

Does a present obligation exist from a past event?

IAS 37 Provision Assessment Toolkit — free PDF

Complete audit toolkit: IAS 37 recognition decision flowchart, measurement methodology guide, discounting worked examples, disclosure checklist, provision type cheat sheet, and journal entry templates.

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IAS 37.14 — A provision shall be recognised when: (a) an entity has a present obligation from a past event; (b) it is probable that an outflow will be required; (c) a reliable estimate can be made.

IAS 37.36 — The amount recognised shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

IAS 37.39 — Where there is a large population of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (expected value).

IAS 37.45 — Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to settle the obligation.

IAS 37.72 — A constructive obligation to restructure arises only when an entity has a detailed formal plan and has raised a valid expectation in those affected.

IAS 37 Application in Ireland

Ireland adopted IAS 37 Provisions, Contingent Liabilities and Contingent Assets through EU endorsement. IAS 37 applies to Irish entities preparing IFRS financial statements, including companies listed on Euronext Dublin (formerly the Irish Stock Exchange) and large groups that are required to or opt for IFRS consolidated reporting. The Irish Auditing and Accounting Supervisory Authority (IAASA) supervises financial reporting quality for public interest entities and oversees the audit profession. The Companies Registration Office (CRO) administers company filings under the Companies Act 2014. Irish GAAP, based on FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, addresses provisions under Section 21, which is broadly consistent with IAS 37 but differs in certain measurement and disclosure requirements. Ireland's position as a major European hub for multinational corporations, particularly in the technology, pharmaceutical, and financial services sectors, creates distinctive provision scenarios. Irish entities frequently deal with provisions for restructuring associated with global corporate reorganisations, product liability arising from pharmaceutical manufacturing, and environmental obligations at industrial sites.

IAASA / CRO Regulatory Expectations

IAASA conducts financial reporting examinations of public interest entities and has published observations on IAS 37 application. IAASA has noted that some Irish entities provide insufficient detail in provision disclosures, particularly regarding the nature and timing of obligations and the key assumptions underlying measurement. IAASA has also highlighted concerns about the completeness of contingent liability disclosures, noting that material possible obligations identified in directors' reports are sometimes not adequately disclosed in the IFRS financial statement notes. The IAASA Financial Reporting Supervision team examines provision-related issues as part of its risk-based review programme, focusing on sectors where provisions are likely to be material — including pharmaceuticals, financial services, and construction. The Chartered Accountants Ireland (CAI) and CPA Ireland provide professional guidance to Irish auditors, and the Institute of Directors in Ireland has published governance guidance relevant to provision oversight by audit committees. The Irish Companies Act 2014 requires a true and fair view of the entity's financial position, which includes the adequate recognition and disclosure of provisions and contingent liabilities.

Practical Guidance for Ireland

Irish entities applying IAS 37 should consider the specific legal framework governing obligations in Ireland. The Irish legal system is based on common law, supplemented by extensive statute law including the Companies Act 2014, the Safety, Health and Welfare at Work Act 2005, the Environmental Protection Agency Act 1992, and the Waste Management Act 1996. For constructive obligations, Irish entities should assess whether published policies, established patterns of past practice, or public statements create valid expectations in the minds of affected parties. The discount rate for long-term provisions should reference Irish Government Bond yields or Eurozone risk-free rates, adjusted for liability-specific risks. For pharmaceutical entities, which are a significant sector in Ireland given the presence of major manufacturers, provisions for product warranty and product liability claims should consider the Irish statute of limitations (Statute of Limitations 1957, as amended) and EU product liability directives. Restructuring provisions for Irish entities must meet the IAS 37.72 criteria, and should consider obligations under the Protection of Employment Act 1977 (as amended) for collective redundancies, which requires notification to the Minister for Enterprise, Trade and Employment.

Audit Expectations

IAASA's audit quality inspections have identified provisions as an area requiring enhanced attention. Common findings include insufficient challenge of management's probability assessments for litigation provision recognition, inadequate testing of the completeness of the provision and contingent liability population, limited evaluation of the discount rates applied to long-term provisions, and insufficient assessment of whether restructuring provisions meet all IAS 37.72 recognition criteria. Irish auditors should obtain and evaluate external legal confirmations from the entity's solicitors for material litigation provisions, and should consider the specifics of the Irish legal system including the distinction between Circuit Court, High Court, and Supreme Court proceedings when assessing the likely timing and quantum of litigation outcomes. IAASA expects auditors to perform retrospective reviews of prior-year provision estimates and to assess the historical accuracy of management's estimation processes. For pharmaceutical entities, auditors should evaluate the completeness and accuracy of product warranty and recall provision estimates against industry benchmarks and historical claims data.

Ireland-Specific Considerations

Ireland-specific IAS 37 considerations include the presence of numerous multinational group treasury and holding companies that may carry provisions related to global group restructuring, intercompany disputes, or tax-related uncertain obligations. The pharmaceutical sector in Ireland, with major manufacturing operations by companies including Pfizer, Johnson & Johnson, and Takeda, generates significant provisions for product warranty, product recall, and regulatory compliance. Environmental obligations in Ireland arise under the Environmental Protection Agency Act 1992 and the Waste Management Act 1996, with the EPA having enforcement powers that can create legal obligations for site remediation. The construction sector faces specific provision challenges following building defect issues, with the Building Control (Amendment) Regulations 2014 creating enhanced obligations for builders and developers. Irish employment law, including the Redundancy Payments Acts 1967-2014 and the Protection of Employment Act 1977 (as amended), creates specific obligations for restructuring provisions including statutory redundancy payments, which are calculated based on length of service. Ireland's Data Protection Act 2018 (implementing GDPR) may create provisions for potential regulatory penalties imposed by the Data Protection Commission, which has become one of the most active data protection regulators in the EU.

Common Audit Inspection Findings — Ireland

Litigation provision probability assessment not adequately challenged — auditor accepted management's solicitor's opinion without independent evaluation of the merits

Completeness of provisions in multinational group structures not adequately tested — potential obligations at subsidiary level not assessed for group-level recognition

Restructuring provision recognised before detailed formal plan communicated to affected employees — notification to the Minister under the Protection of Employment Act not yet made

Contingent liability disclosures incomplete — material possible obligations identified in directors' report not disclosed in the IFRS notes

Discount rate for long-term environmental provisions not independently assessed — rate not benchmarked to Irish Government Bond yields or Eurozone risk-free rates

Frequently Asked Questions — Ireland

How is IAS 37 applied in Ireland?
IAS 37 is applied in Ireland through EU endorsement and is mandatory for entities preparing IFRS financial statements, including Euronext Dublin listed companies. IAASA supervises compliance for public interest entities. Irish entities reporting under FRS 102 apply Section 21 for provisions, which is broadly consistent with IAS 37 but has some measurement differences including less prescriptive discounting requirements. Ireland fully adopts IASB amendments to IAS 37 through the EU endorsement process. The Companies Act 2014 requires financial statements to give a true and fair view, which encompasses adequate provision recognition and disclosure.
What does IAASA expect regarding provision disclosures?
IAASA expects Irish entities to provide entity-specific, informative disclosures for each material class of provision. This includes the nature of the obligation, expected timing of outflows, key assumptions used in measurement, uncertainties affecting the amount or timing, and movements during the period. IAASA has noted that some entities provide overly generic disclosures and has specifically highlighted the importance of complete contingent liability disclosures. IAASA has also emphasised that the commercially sensitive exemption in IAS 37.92 should be used sparingly and only where disclosure would genuinely prejudice the entity's position.
How does FRS 102 interact with IAS 37 for Irish dual reporters?
Irish entities preparing consolidated IFRS financial statements may have subsidiaries reporting under FRS 102. FRS 102 Section 21 requires provisions to be recognised when there is a present obligation, probable outflow, and reliable estimate — the same fundamental criteria as IAS 37. However, FRS 102 is less prescriptive on discounting, requiring it only when material, and has simplified disclosure requirements. The definition of 'probable' is interpreted consistently across both frameworks. Dual reporters should reconcile provision differences, which may arise primarily from discounting methodology and presentation requirements.
What are country-specific provision considerations for Irish pharmaceutical entities?
Irish pharmaceutical entities face specific provision challenges including product warranty provisions for manufactured goods, product recall provisions when quality issues are identified, regulatory compliance provisions for EMA and HPRA requirements, and environmental provisions for manufacturing sites. The Statute of Limitations 1957 (as amended) sets time limits for product liability claims, relevant when estimating the period over which claims may arise. The presence of major pharmaceutical manufacturers in Ireland means that IAASA pays particular attention to the adequacy of provisions in this sector.
What are common IAASA audit inspection findings related to provisions?
IAASA has identified recurring deficiencies including: insufficient challenge of management's probability assessments, particularly for litigation provisions where the auditor accepted management's solicitor's opinion without independent evaluation, inadequate testing of provision completeness — particularly for group-level provisions in multinational holding structures, limited evaluation of discount rates for long-term provisions, and insufficient assessment of whether IAS 37.72 restructuring recognition criteria were met. IAASA has also found that auditors do not always perform adequate retrospective reviews comparing actual outcomes with prior-year provision estimates.

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