Reference no: EM133496209

Question: On January 1, the management of Company DEF decided to restructure its operations. They concluded that they needed to close two of their five plants and lay off somewhere between 1,000 and 3,000 employees. However, the company had never had a restructuring before and had no idea what amount of severance pay they would have to give employees. They also wanted to keep the restructuring a secret until they could present a detailed plan to the employees. On March 1, the company's project team came back with more details. They had refined the plan, so they now knew the following: which two plants would be closed, the equipment under non-cancellable leases that would be unused after the plants were closed, the number of employees at each plant and by job grade that would be terminated, how much severance they would pay each employee, the cost for moving certain continuing employees and equipment to its remaining operating plants, the cost of retraining the continuing employees, the cost of a public relations campaign to market the restructuring to the company's customers and the costs of contracts made onerous by the restructuring. On April 1, DEF's Board of Directors met and approved the plan and decided that the plan should be announced by June and be concluded by the end of the calendar year. On June 1, DEF formally announced the plan to its employees and its customers. On July 1, the DEF formally terminated the leases on its two plants effective at the end of the year and sent all of its layoff notices to employees effective August 31.

Under IFRS, on what date can DEF recognize a provision for the restructuring?

The company's plan includes the following costs: lease termination costs for the two plants ($3,000,000), equipment lease costs under noncancelable leases for periods before and after operations cease ($200,000 and $600,000, respectively), severance costs for the employees ($2,000,000), continuing employee relocation costs ($1,300,000), retraining costs for continuing employees ($300,000), equipment moving costs ($700,000), the public relations campaign ($2,500,000) and costs associated with contracts made onerous as a result of the restructuring ($1,800,000). How much of these costs can the company recognize on the date it first recognizes its restructuring provision?