Onerous contracts: economics and reporting

Abstract

Importance. The article discusses issues of reflecting onerous contracts in financial reporting prepared in accordance with IFRS and focuses on the impact of these contracts on businesses and the economy as a whole. Main provisions for onerous contracts reporting are analyzed and possible solutions for reporting issues are proposed. Special attention is devoted to importance of professional judgment and mutual correlation of information disclosures in various types of reporting. Objectives. Present author's research of the problem of accounting reflection of burdensome contracts and develop new proposals for disclosure of onerous contracts in the financial statements. Methods. Research is based on methods of logic, analogy and statistical analysis. Results. Stakeholders do not receive relevant information regarding the risks generated by onerous contracts and the risks they offset. The rules for forming financial statements regarding such agreements are not always detailed and leave room for various interpretations. Conclusions and Relevance. It is concluded that it is necessary to provide stakeholders with more complete information about onerous contracts based on the use of consolidated financial and non-financial reporting data, disclosure of risks caused by onerous contracts and mitigated by them. It is concluded that similar disclosures are useful for loss-making contracts prepared and structured using method of professional judgment and responsibility.