Constructive obligation

Financial reporting - provisions - contingent liabilities - International Accounting Standards - IAS 37.

IAS 37 deals with provisions, contingent liabilities and contingent assets.

Under IAS 37, a constructive obligation arises if past practice creates a valid expectation on the part of a third party, for example, a retail store that has a long-standing policy of allowing customers to return merchandise within, say, a 30-day period.

In turn, an event that creates a constructive obligation can be an obligating event.

See also

• Contingent assets
• Contingent liabilities
• FRS 102
• IAS 37
• International Financial Reporting Standards
• Obligating event
• Provision