IAS 37 vs ASC 450: what are the differences?
| Area | IAS 37 | ASC 450 and related topics |
|---|---|---|
| Recognition threshold | Probable: more likely than not | Probable: likely to occur, a higher bar |
| Measurement, range with no best estimate | Midpoint of a continuous range of equally likely outcomes | Low end of the range, with disclosure of the reasonably possible additional loss |
| Discounting | Required when the effect is material | Generally not, unless amounts and timing are fixed or reliably determinable |
| Restructuring costs | When a constructive obligation exists: detailed plan and announcement | ASC 420: when the liability is incurred, cost by cost |
| Onerous contracts | Provision for any onerous contract | No general requirement; specific guidance only |
| Contingent assets | Recognised when virtually certain | Gain contingencies recognised only when realised |
| Terminology | Provisions and contingent liabilities | Loss contingencies, accrued or disclosed |
An example: a lawsuit with a range
A company is sued. Its lawyers say a loss is quite likely, about 65%, and that damages would be anywhere between $10 million and $30 million, with no amount in the range more likely than another.
| IAS 37 | ASC 450 | |
|---|---|---|
| Is the threshold met? | Yes: more likely than not | Depends on judgement: 65% may or may not be "likely" |
| Amount, if recognised | $20 million, the midpoint | $10 million, the low end, plus disclosure of up to $20 million more |
The IFRS liability is twice the US one, and the US company might recognise nothing if it concludes a 65% chance is not "likely to occur".
How does restructuring differ?
Under IAS 37, a restructuring provision is recognised once a detailed plan has been announced. Under ASC 420, each cost is recognised when the liability is incurred: one-time termination benefits when the plan is communicated to employees, or over the remaining service period if they must work beyond a minimum retention period, and contract termination costs when the contract is terminated. US restructuring charges are often spread over more periods. See restructuring provisions under IAS 37.
Why are onerous contracts different?
IAS 37 requires a provision whenever the unavoidable costs of a contract exceed its benefits. US GAAP has no general onerous contract model; losses on executory contracts are recognised only where specific guidance requires it, such as certain construction or purchase commitments. See onerous contracts.
How do the disclosures differ?
Both require disclosure of contingent liabilities that are possible but not recognised, unless remote. US GAAP also requires disclosure of an estimate of the reasonably possible loss in excess of amounts accrued, or a statement that it cannot be estimated, and the SEC focuses closely on these disclosures. IFRS allows details to be withheld in extremely rare cases where disclosure would seriously prejudice the company's position in a dispute.
Where to go next
See IAS 37 explained and contingent liabilities.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
What is the difference between IAS 37 and ASC 450?
IFRS recognises a provision when an outflow is more likely than not; US GAAP requires a loss to be likely. Measurement of ranges, discounting, restructuring and onerous contracts also differ.
How is a range of outcomes measured under IFRS and US GAAP?
When no amount in a continuous range is more likely, IFRS uses the midpoint and US GAAP the low end, with disclosure.
Are provisions discounted under US GAAP?
Generally not, unless the amount and timing of payments are fixed or reliably determinable. IFRS discounts when material.
Does US GAAP have onerous contract provisions?
Not as a general rule; only where specific guidance requires losses on certain contracts to be recognised.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IFRS Foundation: IAS 37 Provisions, Contingent Liabilities and Contingent Assets
- FASB Accounting Standards Codification: Topic 450, Contingencies
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS vs US GAAP
This guide is general information. It is not tax or legal advice for your situation.