Onerous contract - Revision history

Designing Buildings at 06:17, 19 August 2021

2021-08-19T06:17:15Z

← Older revision		Revision as of 06:17, 19 August 2021
Line 1:		Line 1:
	= Introduction =		= Introduction =

−	An onerous contract (sometimes referred to as a loss making contract) can occur when the cost of meeting the obligations agreed ~~upon~~ under the contract exceeds the anticipated economic benefit to be received ~~upon the completion of the task or project. The term is generally associated with accounting practices that can apply to the business aspects of construction~~.	+	An onerous contract (sometimes referred to as a loss making contract) can occur when the cost of meeting the obligations agreed under the contract exceeds the anticipated economic benefit to be received.

	= IAS 37 =		= IAS 37 =
Line 11:		Line 11:
	= Onerous contracts and the Sourcing playbook =		= Onerous contracts and the Sourcing playbook =

−	An onerous contract may be apparent from the beginning of the project, or it can ~~occur~~ due to changes in availability, unpredictable costs or other unavoidable circumstances.	+	An onerous contract may be apparent from the beginning of the project, or it can become apparent due to changes in availability, unpredictable costs or other unavoidable circumstances.

	[https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook, Government Guidance on service delivery, including outsourcing, insourcing, mixed economy sourcing and contracting], explains that onerous (or loss making) contracts may be “a possible consequence of getting risk allocation and payment mechanisms wrong. When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this.”		[https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook, Government Guidance on service delivery, including outsourcing, insourcing, mixed economy sourcing and contracting], explains that onerous (or loss making) contracts may be “a possible consequence of getting risk allocation and payment mechanisms wrong. When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this.”

−	The Sourcing playbook was produced by the Cabinet Office and published in May 2021. It emphasises that the delivery of public services is a collaborative endeavour involving colleagues from commercial, finance, project delivery, policy and other professions. It ~~proposes to capture~~ best practices from across the Government within 11 key policies that all central departments are expected to follow.	+	The Sourcing playbook was produced by the Cabinet Office and published in May 2021. It emphasises that the delivery of public services is a collaborative endeavour involving colleagues from commercial, finance, project delivery, policy and other professions. It captures best practices from across the Government within 11 key policies that all central departments are expected to follow.

	For more information see: [https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook].		For more information see: [https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook].

Editor at 16:50, 18 August 2021

2021-08-18T16:50:50Z

← Older revision		Revision as of 16:50, 18 August 2021
Line 25:		Line 25:
	* Collateral warranties for building design and construction.		* Collateral warranties for building design and construction.
	* Practical considerations of collateral warranties.		* Practical considerations of collateral warranties.
−	* Rental method of rating valuation.
	* Recovery of third party losses.		* Recovery of third party losses.
	* Sourcing playbook.		* Sourcing playbook.

Editor at 16:45, 18 August 2021

2021-08-18T16:45:06Z

← Older revision		Revision as of 16:45, 18 August 2021
Line 21:		Line 21:
	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

		+	* CLC urges inclusion of fluctuations provisions in contracts.
		+	* Construction contract.
	* Collateral warranties for building design and construction.		* Collateral warranties for building design and construction.
	* Practical considerations of collateral warranties.		* Practical considerations of collateral warranties.
	* Rental method of rating valuation.		* Rental method of rating valuation.
	* Recovery of third party losses.		* Recovery of third party losses.
		+	* Sourcing playbook.
		+	* Supply chains in construction.

	= External resources =		= External resources =

Editor at 16:42, 18 August 2021

2021-08-18T16:42:22Z

← Older revision		Revision as of 16:42, 18 August 2021
Line 13:		Line 13:
	An onerous contract may be apparent from the beginning of the project, or it can occur due to changes in availability, unpredictable costs or other unavoidable circumstances.		An onerous contract may be apparent from the beginning of the project, or it can occur due to changes in availability, unpredictable costs or other unavoidable circumstances.

−	The Sourcing Playbook, Government Guidance on service delivery, including outsourcing, insourcing, mixed economy sourcing and contracting, explains that onerous (or loss making) contracts may be “a possible consequence of getting risk allocation and payment mechanisms wrong. When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this.”	+	[https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook, Government Guidance on service delivery, including outsourcing, insourcing, mixed economy sourcing and contracting], explains that onerous (or loss making) contracts may be “a possible consequence of getting risk allocation and payment mechanisms wrong. When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this.”

	The Sourcing playbook was produced by the Cabinet Office and published in May 2021. It emphasises that the delivery of public services is a collaborative endeavour involving colleagues from commercial, finance, project delivery, policy and other professions. It proposes to capture best practices from across the Government within 11 key policies that all central departments are expected to follow.		The Sourcing playbook was produced by the Cabinet Office and published in May 2021. It emphasises that the delivery of public services is a collaborative endeavour involving colleagues from commercial, finance, project delivery, policy and other professions. It proposes to capture best practices from across the Government within 11 key policies that all central departments are expected to follow.

−	For more information see: The Sourcing Playbook.	+	For more information see: [https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987353/The_Sourcing_Playbook.pdf The Sourcing Playbook].

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =
Line 29:		Line 29:

	* IASB and IFRS, [https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/Onerous%20Contracts%20-%20Cost%20of%20Fulfilling%20a%20Contract%20-%20Amendments%20to%20IAS%2037.pdf Onerous Contracts - Costs of Fulfilling a Contract: Amendments to IAS 37].		* IASB and IFRS, [https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/Onerous%20Contracts%20-%20Cost%20of%20Fulfilling%20a%20Contract%20-%20Amendments%20to%20IAS%2037.pdf Onerous Contracts - Costs of Fulfilling a Contract: Amendments to IAS 37].
		+
		+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Standard]] [[Category:Definitions]] [[Category:Standards_/_measurements]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

Editor: Created page with "= Introduction = An onerous contract (sometimes referred to as a loss making contract) can occur when the cost of meeting the obligations agreed upon under the contract exceeds ..."

2021-08-18T16:39:49Z

Created page with "= Introduction = An onerous contract (sometimes referred to as a loss making contract) can occur when the cost of meeting the obligations agreed upon under the contract exceeds ..."

New page

= Introduction =

An onerous contract (sometimes referred to as a loss making contract) can occur when the cost of meeting the obligations agreed upon under the contract exceeds the anticipated economic benefit to be received upon the completion of the task or project. The term is generally associated with accounting practices that can apply to the business aspects of construction.

= IAS 37 =

The International Accounting Standard 37: Provisions, Contingent Liabilities and Contingent Assets, or IAS 37, is an international financial reporting standard that applies to practices associated with onerous contracts.

In May 2020, the IAS Board issued [https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/Onerous%20Contracts%20-%20Cost%20of%20Fulfilling%20a%20Contract%20-%20Amendments%20to%20IAS%2037.pdf Onerous Contracts - Cost of Fulfilling a Contract] as amendments to IAS 37. The amendments specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous.

= Onerous contracts and the Sourcing playbook =

An onerous contract may be apparent from the beginning of the project, or it can occur due to changes in availability, unpredictable costs or other unavoidable circumstances.

The Sourcing Playbook, Government Guidance on service delivery, including outsourcing, insourcing, mixed economy sourcing and contracting, explains that onerous (or loss making) contracts may be “a possible consequence of getting risk allocation and payment mechanisms wrong. When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this.”

The Sourcing playbook was produced by the Cabinet Office and published in May 2021. It emphasises that the delivery of public services is a collaborative endeavour involving colleagues from commercial, finance, project delivery, policy and other professions. It proposes to capture best practices from across the Government within 11 key policies that all central departments are expected to follow.

For more information see: The Sourcing Playbook.

= Related articles on Designing Buildings Wiki =

* Collateral warranties for building design and construction.
* Practical considerations of collateral warranties.
* Rental method of rating valuation.
* Recovery of third party losses.

= External resources =

* IASB and IFRS, [https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/Onerous%20Contracts%20-%20Cost%20of%20Fulfilling%20a%20Contract%20-%20Amendments%20to%20IAS%2037.pdf Onerous Contracts - Costs of Fulfilling a Contract: Amendments to IAS 37].