What is an onerous contract How are onerous contracts accounted for?
What is an onerous contract How are onerous contracts accounted for? An onerous contract is an accounting term that refers to a contract that will cost a company more to fulfill than what the company will receive in return. The term is used in many countries worldwide, where international regulators have determined that such contracts must be accounted for on balance sheets. How do you account for onerous contracts? Per IAS 37, onerous contracts should be classified as “provisions.” So, if you've identified a specific contract as onerous, you're required to recognize the current obligation as a liability and list...