The contract requirement: written or not, but not a tax

Learning objectives

• Explain that a contract need not be in writing, but that a non-contractual statutory obligation, such as an income tax, is not a financial liability.L1
• Identify, among an entity's obligations, those that are contractual.L2

Normative references

• IAS 32 §13The terms 'contract' and 'contractual' refer to an agreement between two or more parties that has clear economic consequences that the parties have little, if any, discretion to avoid, usually because the agreement is enforceable by law; a contract, and thus a financial instrument, may take a variety of forms and need not be in writing.
• IAS 32 §AG12Liabilities or assets that are not contractual, such as income taxes created as a result of statutory requirements (IAS 12), are not financial liabilities or financial assets; similarly, constructive obligations as defined in IAS 37 do not arise from contracts and are not financial liabilities.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• An oral agreement, with no written document signed by the parties, cannot be a contract within the meaning of IAS 32.L1
• Sigma SA lists its obligations at 31 December to assess which are financial liabilities (case facts). Which of these obligations is not a financial liability, because it is not contractual?L2