A funded obligation does not automatically disappear
Ind AS 37 Appendix A addresses contributor interests in decommissioning, restoration and environmental-rehabilitation funds whose assets are separately administered and whose access is restricted. Paragraph 7 requires recognition of the decommissioning obligation and the fund interest separately, unless the contributor is not liable even if the fund fails to pay. Funding arrangements alone do not establish that exception. This guide concerns the contributor's accounting, not the fund administrator's own financial statements. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
Assess control before applying the reimbursement formula
Paragraph 8 requires assessment of control, joint control and significant influence by reference to Ind AS 110, 111 and 28. If one of those relationships exists, apply those standards. The paragraph 9 reimbursement route is for a contributor without those relationships. A separately administered fund does not by itself prove absence of control; review its substantive governance and contractual terms. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
The eligible reimbursement is capped
Under paragraph 9, recognise the right as a reimbursement in accordance with Ind AS 37. Measure it at the lower of the recognised decommissioning obligation and the contributor's share of the fair value of fund net assets attributable to contributors. Under Ind AS 37 paragraph 53, recognise the reimbursement only when it is virtually certain that it will be received if the entity settles the obligation. Establish the entitlement and this recognition condition before using the arithmetic. Neither cash contributed nor the fund's entire net asset balance is automatically the contributor's recognised asset. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
Separate valuation movements from transactions
Changes in the carrying amount of the reimbursement right, other than contributions to and payments from the fund, are recognised in profit or loss in the period of change under paragraph 9. Retain a movement schedule separating contributions, reimbursements and remeasurement. Do not call a fresh contribution an investment gain or treat a reimbursement cash receipt as a second income recognition of an existing asset. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
Surplus rights and additional calls require separate analysis
A residual interest extending beyond reimbursement may be an Ind AS 109 equity instrument outside this Appendix's scope. Restrictions on access to a surplus therefore matter. Paragraph 10 addresses potential additional contributions, for example following another contributor's bankruptcy or fund asset losses: the obligation is a contingent liability in scope of Ind AS 37, with a liability recognised only when additional contributions are probable. Assess the actual obligation and measurement rather than automatically recognising every announced scenario. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
Disclose the interest and restrictions
Paragraphs 11–13 require disclosure of the interest's nature and restrictions, relevant contingent additional-contribution information, and the reimbursement information specified by Ind AS 37. The examples assume no control, joint control or significant influence, continuing contributor liability, a recognised obligation, and an eligible recognised reimbursement right. They isolate the stated measurement and movements; they do not resolve the underlying obligation's discounting or a disputed legal entitlement. Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium.
Applicable primary references
Ind AS 37 Appendix A, paragraphs 4–13, and paragraphs 53, 85(c) and 86, ICAI 2025–26 compendium
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Fund share below the obligation
Recognised decommissioning obligation is ₹100 lakh and the contributor's eligible share of fair-value net assets is ₹80 lakh. The reimbursement asset is the lower amount, ₹80 lakh. Liability remains ₹100 lakh separately; the ₹20 lakh difference is a diagnostic exposure measure, not permission to present only a ₹20 lakh net liability.
Illustrative example 2: Fund share above the obligation
The obligation is ₹100 lakh and eligible fund share ₹120 lakh. The reimbursement right under this model is capped at ₹100 lakh, leaving ₹20 lakh above that cap. Do not recognise the extra ₹20 lakh as another reimbursement asset without analysing any separate residual right and applicable standard.
Illustrative example 3: Calculate the contributor's share first
Fund net assets attributable to contributors have fair value ₹500 lakh. The entity's supported share is 20%, or ₹100 lakh. Against a recognised obligation of ₹120 lakh, the reimbursement asset is ₹100 lakh and the diagnostic gap ₹20 lakh. Using the entire ₹500 lakh fund balance would ignore the entity's actual share.
Illustrative example 4: Recognise an eligible value increase separately
With an unchanged ₹100 lakh obligation, the supported eligible fund share rises from ₹80 lakh to ₹90 lakh, with no contribution or payment movement. The reimbursement asset increases by ₹10 lakh. Under the paragraph 9 assumptions, that remeasurement increase goes to profit or loss in the period rather than being described as a contribution.
Illustrative example 5: Contribution and valuation gain are different
The opening reimbursement right is ₹80 lakh. A supported ₹10 lakh contribution and ₹5 lakh favourable remeasurement produce a closing right of ₹95 lakh, with an unchanged ₹100 lakh obligation and no binding cap issue. The remeasurement gain is ₹5 lakh, not the full ₹15 lakh movement. The contribution has its own transaction entry.
Illustrative example 6: Reimburse an eligible settlement once
Opening recognised obligation is ₹100 lakh and reimbursement asset ₹80 lakh. The contributor pays an eligible ₹30 lakh decommissioning settlement and receives a ₹30 lakh reimbursement from the fund, with no other changes. The liability reduces to ₹70 lakh and reimbursement asset to ₹50 lakh. The diagnostic gap remains ₹20 lakh; collecting the existing reimbursement right does not create another ₹30 lakh gain merely from cash receipt.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the arrangement | Separate administration and restricted-access evidence. |
| 2 | Identify the contributor's obligation | Liability terms and continuing responsibility if the fund fails. |
| 3 | Assess governance relationships | Control, joint control and significant-influence analysis. |
| 4 | Select the applicable accounting route | Relevant consolidation or paragraph 9 reimbursement treatment. |
| 5 | Verify reimbursement recognition | Entitlement and applicable Ind AS 37 recognition support. |
| 6 | Measure the eligible fund share | Fair-value net assets attributable to contributors and supported allocation. |
| 7 | Apply the obligation cap | Lower-of calculation without unauthorised netting. |
| 8 | Reconcile movements | Contributions, fund payments and remeasurement separated. |
| 9 | Review surplus rights and additional calls | Separate residual-interest and contingent-contribution assessments. |
| 10 | Complete disclosures | Nature, restrictions and applicable reimbursement or contingent-liability information. |
Sixteen practitioner FAQs
1. Which Appendix addresses these fund interests?
Appendix A to Ind AS 37.
2. What scope features matter?
Separate administration of assets and restricted contributor access.
3. Does contributing cash automatically extinguish the obligation?
No. Assess the paragraph 7 liability condition and actual legal position.
4. Is the liability normally shown separately from the fund interest?
Paragraph 7 requires separate recognition under its stated conditions.
5. What if the contributor is not liable even if the fund fails?
Assess that express paragraph 7 exception on evidence rather than assuming it from funding alone.
6. Why assess control first?
Control, joint control or significant influence leads to the accounting standards identified in paragraph 8.
7. Does the paragraph 9 formula apply to every contributor?
No. It applies to the specified no-control, no-joint-control, no-significant-influence reimbursement route.
8. What are its two measurement amounts?
The recognised decommissioning obligation and the contributor's eligible share of fair-value fund net assets.
9. Which amount is used?
The lower amount, subject to the applicable recognition requirements.
10. Is total fund value the same as the contributor's share?
No. Establish the supported allocation and attributable net assets.
11. Are contribution receipts or payments automatically remeasurement gains?
No. Separate fund transactions from valuation movements.
12. Where do paragraph 9 non-transaction value changes go?
To profit or loss in the period of change under the stated rule.
13. Can a fund surplus always be added to the reimbursement asset?
No. Analyse the cap, access restrictions and any separate residual right.
14. How are potential additional contributions considered?
Under paragraph 10's contingent-liability framework, recognising a liability only when additional contributions are probable.
15. What restrictions should be disclosed?
The nature of the fund interest and restrictions on access, with the other required information.
16. Does collecting an existing reimbursement right create the same income again?
No. Reconcile the receipt against the recognised right on the assumed unchanged facts.
Conclusion
Assess restricted decommissioning-fund interests under Ind AS 37 Appendix A, checking control first and measuring eligible reimbursement rights separately from obligations.