Provisions—Targeted Improvements

The IASB met on 24 September 2025 to redeliberate the proposals in the Exposure Draft Provisions—Targeted Improvements relating to the rate an entity uses to discount future expenditure to its present value.

Discount rates—Required rates (Agenda Paper 22A)

The IASB tentatively decided:

1. to retain the proposal to require an entity to discount a provision at a rate that reflects the time value of money—represented by a risk-free rate—with no adjustment for the effect of non-performance risk;
2. to add no application guidance to IAS 37 Provisions, Contingent Liabilities and Contingent Assets on how an entity determines an appropriate risk-free discount rate;
3. to clarify in IAS 37 that the best estimate of the expenditure required to settle an obligation is not reduced to reflect the effect of non-performance risk; and
4. to add no requirements on the use of real or nominal discount rates in measuring a provision.

All 12 IASB members agreed with these decisions.

Discount rates—Interaction with IFRS 3 (Agenda Paper 22B)

The IASB tentatively decided to add to IFRS 3 Business Combinations an exception to its initial measurement principle that:

1. applies to provisions (other than contingent liabilities) within the scope of IAS 37; and
2. requires an acquirer to measure these provisions at the acquisition date in accordance with the measurement requirements in IAS 37, instead of at their acquisition date fair values.

All 12 IASB members agreed with these decisions.

Discount rates—Disclosure (Agenda Paper 22C)

The IASB tentatively decided:

1. to retain the proposal to require an entity applying IAS 37 to disclose:
   1. the discount rate(s) used in measuring a provision; and
   2. the approach used to determine the rate(s);
2. to add no further disclosure requirements to IAS 37; and
3. to retain the proposals:
   1. to require subsidiaries applying IFRS 19 Subsidiaries without Public Accountability: Disclosures to disclose the discount rate(s) used in measuring a provision; but
   2. not to require them to disclose the approach used to determine the rate(s).

All 12 IASB members agreed with these decisions.