According to IAS 37,with respect to onerous contracts,a provision should be recognized for "unavoidable costs of the contract",which is defined as:

Question

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According to IAS 37, an onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits or returns expected to be received under it. For such contracts, a provision should be recognized for the lower of the cost of fulfilling the contract and any penalty for non-fulfillment. Therefore, option C is the correct choice. Options A and B are incorrect because they do not reflect the economic substance of an onerous contract. Option D is incorrect because the standard provides guidance on the recognition of provisions for onerous contracts.

According to IAS 37,with Respect to Onerous Contracts,a Provision Should