The costs under an onerous contract are measured as:

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According to IAS 37, the costs under an onerous contract are measured as the lower of the cost of fulfilling the contract and any compensation or penalties arising from failure to fulfill the contract. This is because an onerous contract is one where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Therefore, the company should recognize a provision for the expected loss on the onerous contract which is measured at the lower of the cost of fulfilling the contract or the compensations/penalties arising from failure to fulfill the contract.

The Costs Under an Onerous Contract Are Measured As