IAS 37Chapter 6Lesson 1
Reimbursements expected from third parties
Step 1 of 8Learning objectives
Go deeper+2 deeper insights · +1 calculation · +1 point of attention
When an insurer, a supplier or another third party is expected to reimburse some or all of the expenditure covered by a provision, the reimbursement is recognised only when it is virtually certain to be received if the entity settles the obligation. It is then a separate asset, capped at the amount of the provision: the provision stays gross on the balance sheet. In profit or loss, the expense may be presented net of the reimbursement. If the entity is not liable for the costs should the third party fail to pay, those costs are excluded from the provision.
20 minNot started
Learning objectives
- Determine whether an expected reimbursement (insurance, indemnity, supplier warranty) can be recognised: virtual certainty, separate asset, cap.
- Calculate the capped reimbursement asset and the net expense presented.
- Record the gross provision and the reimbursement asset separately.
- Distinguish the situation where the entity remains liable for the full amount from the one where it is not liable if the third party fails to pay.