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If Company A decides to close down its foreign subsidiary, company B and move all business into Company A. There will be specific costs that relate to the closure of Company B. e.g. some employees are being paid retention packages and being given a relocation allowance to relocate to Company A. Would we be able to raise an accrual in the current year for those specific costs as some would argue that the expense does not relate to the current period? if we consider the matching principle then what is the revenue related to that cost? A legal contract will be signed in the current year for all employees who accept the retention package.
in IAS 37 - Provisions, Contingent Liabilities and Contingent Assets by

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If the legal contracts are signed within the current period, you need to accrue the agreed sums in your books (IAS 37.11b) within the current year. However if the legal contracts are not signed and the timing is uncertain but reliable estimate can be made, you can make a provision (IAS 37.14).

the application of the matching concept under IFRS Conceptual Framework does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities (Conceptual Framework - 4.50).
by Level 5 Member (25.6k points)


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