IASB Finalises Direction on IAS 37 Provisions: What Changes in 2027
Background: Why IAS 37 Is Being Rewritten
IAS 37 has been part of IFRS for decades, yet it has never contained explicit guidance on how to measure a provision or which discount rate to apply. That silence produced a wide divergence in practice. Companies apply their local GAAP instincts, choose discount rates that suit them, and include or exclude costs based on their own policy choices. As economic uncertainty has increased, the IASB concluded that the inconsistency was undermining comparability, particularly for obligations that extend over long periods or depend on complex regulatory conditions.
The 2024 exposure draft proposed a sweeping revision: new recognition tests, a requirement to include all direct costs in certain measurements, and a prescribed discount rate. The consultation drew significant feedback, including pushback on the withdrawal of IFRIC 21. The October 2026 update reflects how the IASB has responded to that feedback and what the final standard is likely to contain.
Three Key Decisions from the IASB's Post-Consultation Review
1. Levy Guidance Replaces IFRIC 21 Inside IAS 37
One of the most contested proposals was the withdrawal of IFRIC 21, which governs when an entity recognises a liability for a levy charged by a government. The IASB received enough pushback to reconsider its approach. Rather than leaving companies to apply the general IAS 37 tests to levies without any dedicated guidance, the IASB has decided to incorporate specific levy guidance directly into IAS 37.
The practical effect is a change in how preparers determine the timing of levy recognition. Under IFRIC 21, recognition is triggered by the last obligating activity. The new IAS 37 guidance will require preparers to identify which activity the government is seeking to levy, and that identification drives the timing. For levies that are payable only when multiple conditions or thresholds are met, the point of recognition could shift earlier in the reporting period. This requires genuine judgement, not a mechanical look-back to the last event.
For entities in regulated digital asset markets, this matters directly. Exchange fees charged by regulators, transaction-based assessments, or threshold-linked levies attached to crypto licensing regimes could all be affected by the timing shift. Teams currently accounting for such levies under IFRIC 21 logic will need to reassess recognition timing against the new IAS 37 tests when the final standard lands.
2. Measurement Depends on How the Obligation Will Be Settled
IAS 37 currently contains no explicit rule on which costs belong in a provision measurement. The result is that practice varies considerably. The IASB has now clarified its position based on consultation responses, linking measurement to the expected settlement method.
Where the obligation requires the transfer of cash only, for example to settle a legal claim, the provision is measured at the cash amount. Where the obligation requires the transfer of goods or services, for example engaging a third party to perform decommissioning work, the provision must include all direct costs. That is a meaningfully broader pool than the narrow approach some entities currently use, which captures only the most direct expenditure and excludes associated overhead or coordination costs.
In a digital asset context, consider obligations arising from infrastructure decommissioning at the end of a mining operation, regulatory remediation orders linked to an exchange or custody platform, or environmental levies tied to proof-of-work energy consumption. Each of these involves a service-based settlement. Under the clarified approach, the provision must reflect all direct costs of that settlement, not just the headline contractor fee. Finance teams that have historically taken a narrow view of "direct costs" will need to revisit their provisioning methodology.
3. Risk-Free Discount Rate Becomes Mandatory
Perhaps the most financially significant decision is the IASB's confirmation that it will proceed with a mandatory risk-free discount rate for measuring long-term provisions. Currently, practice diverges: some entities use a risk-free rate, while others adjust upward for their own credit risk or for non-performance risk. The new requirement eliminates that choice.
A risk-free rate is typically lower than a rate adjusted for credit risk. A lower discount rate produces a higher present value for a long-term obligation. In plain terms: for any entity carrying a long-duration provision, the balance sheet liability is likely to increase. The longer the expected settlement horizon, the larger the impact. For digital asset infrastructure businesses with decommissioning or rehabilitation obligations measured over five, ten, or fifteen years, the difference can be material.
What This Means for Crypto Financial Statements
Earlier Recognition and Larger Balances
The combined effect of the three decisions is directional: provisions will, for many entities, be recognised sooner and at a higher amount. The IASB's own analysis acknowledges that the impacts could be significant depending on the nature of obligations and existing accounting policies. Entities that have historically adopted the latest possible recognition trigger and the most permissive measurement approach face the steepest adjustment.
For firms preparing IFRS crypto assets disclosures, the provision line on the balance sheet is one area where audit scrutiny will increase. Auditors will need to challenge whether the updated recognition tests have been applied, whether all direct costs have been captured in service-based obligations, and whether the discount rate has been recalibrated to risk-free. Each of these is a potential audit difference if the groundwork is not laid early.
New Judgements Required
The shift away from the mechanical IFRIC 21 trigger to a judgement-based assessment of which activity a levy is designed to reach is not trivial. It requires preparers to understand the legislative intent behind each levy they are subject to, which in the digital asset space can include novel regulatory charges that have no direct precedent in traditional finance. Documenting that judgement clearly, and consistently across reporting periods, will matter for audit and for any future regulatory review.
Firms using crypto compliance and reporting frameworks should begin mapping their existing provisions against the three new tests now. The mapping does not need to be definitive before the final standard is published, but identifying which balances are likely to be affected allows finance teams to sequence their transition work and avoid a last-minute scramble in 2027.
It is also worth noting the interplay with other developing standards. As we covered in our analysis of OCC GENIUS Act stablecoin rule: accounting implications, regulatory obligations on digital asset issuers are accumulating across jurisdictions. Where those obligations give rise to provisions, whether for redemption guarantees, reserve shortfalls, or enforcement remediation, the revised IAS 37 measurement framework will apply. Similarly, how crypto financial statements are affected by new stablecoin licensing regimes is increasingly a practical question as regulated digital asset activities expand.
Practical Steps for Accounting Firms and CFOs
Mapping and Impact Assessment
The first priority is a complete inventory of existing provisions. For each balance, teams should record the current recognition trigger, the measurement basis, the costs included, and the discount rate applied. That inventory then gets tested against the revised IAS 37 criteria: does the recognition trigger align with the new activity-based test? Does the measurement include all direct costs where the settlement involves services? Is the discount rate risk-free?
Differences identified at this stage are not failures; they are exactly the intelligence needed to plan a smooth transition. Quantifying the financial statement impact of each difference, particularly the discount rate change on long-term provisions, allows CFOs to communicate the likely magnitude to audit committees and boards well ahead of the effective date.
Policy Redrafting and System Readiness
Once the final standard is published, accounting policies will need to be updated. For firms using digital asset accounting software or enterprise reporting platforms, the discount rate input is often a system-level parameter rather than a manually entered figure. Confirming that the system can be configured to apply a risk-free rate, and that the rate source is auditable, is an early infrastructure task rather than a transition-week problem.
Levy accounting policies are likely to require the most substantive redrafting, given the replacement of the IFRIC 21 logic with the new judgement framework. Each levy type should be documented with a clear description of the obligating activity, the basis for the judgement about which activity the levy is designed to reach, and the resulting recognition point. That documentation serves dual purposes: it supports the financial statements and provides the audit trail the external auditor will request.
Engagement with Auditors and Standard-Setters
With final amendments not expected until the first half of 2027, there is a window to engage constructively with auditors on transition approaches and with national standard-setters on any jurisdiction-specific guidance that may follow adoption. In OECD jurisdictions where IFRS is adopted through a formal endorsement process, there may also be timing differences between IASB publication and local effective dates. Tracking those timelines is part of the transition planning exercise.
Frequently Asked Questions
When will the final IAS 37 amendments be published?
The IASB is targeting the first half of 2027 for the final amendments. The October 2026 update reflects decisions taken in response to the 2024 exposure draft consultation, but the definitive text has not yet been issued.
How will the new levy guidance differ from IFRIC 21?
IFRIC 21 currently requires recognition only when the last obligating event occurs. Under the revised IAS 37, preparers will need to apply judgement to identify which activity the government is seeking to levy, and that activity drives the timing of recognition. For levies conditional on multiple thresholds, recognition may shift earlier.
What discount rate must companies use for long-term provisions under the new rules?
The IASB has confirmed it will proceed with a mandatory risk-free discount rate for long-term provisions. Companies currently using rates adjusted for non-performance risk or their own credit risk will need to recalibrate, and in many cases this will increase the present value of the provision.
How does the measurement change affect crypto-related obligations?
Where an obligation requires a company to transfer goods or services, for example engaging a third party for infrastructure decommissioning or regulatory remediation linked to a digital asset platform, the amended standard requires all direct costs to be included in the measurement. This is a broader base than many entities currently apply, which means provisions for such obligations are likely to grow.
Do US GAAP preparers need to take note of these IAS 37 changes?
ASC 450 (contingencies) and ASC 410 (asset retirement obligations) govern provisions under US GAAP and will not be amended by this IASB project. However, groups that consolidate under IFRS, or that have subsidiaries reporting under IFRS, will be directly affected. US-listed entities with IFRS subsidiaries carrying digital asset obligations should assess the cross-framework exposure now.
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