18-20 October 2001, Washington, DC USA

Business Combinations: [Project Summary]

Among the tentative decisions reached by the Board:

• The acquirer should recognise restructuring-type provisions for terminating or reducing activities of the acquiree at time of acquisition only if the acquiree has, as at the date of acquisition, an existing liability for restructuring costs recognised in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets.
• Minority interests should be presented within equity in the balance sheet, but separately from the parent shareholders' equity. This would require amendment of IAS 27, Consolidated Financial Statements and Accounting for Investments in Subsidiaries.
• If less than a 100% interest in a subsidiary is acquired, the minority's proportion of the acquired identifiable assets and liabilities should be measured at fair value, the same as the acquirer's proportion. This is currently the allowed alternative treatment under IAS 22, Business Combinations. IAS 22's benchmark treatment of measuring minority interest at minority's minority's proportion of the pre-acquisition carrying amounts of the acquiree's identifiable net assets would not be permitted.
• Phase 1 of the IASB business combinations project will not address reacquisition of minority interest in a subsidiary by the parent, the subsidiary itself or another entity within the consolidated group. That issue will be left for phase 2.
• With regard to negative goodwill (excess of the fair values of the acquirfed identifiable net assets over the acquisition cost), the following should be done in sequence: First, re-examine whether all identifiable net assets have been properly identified and measured (particularly to ensure that some specific identifiable acquired intangible assets have not been overlooked or fair values overstated) Second, rreduce (if necessary to nil) the carrying amounts recognised for those acquired identifiable net assets that do not have a 'readily ascertainable market value'. Third, recognise any remaining negative goodwill immediately in income as a gain.
• Goodwill should be tested for impairment before the end of the financial reporting period in which the business combination occurs.
• In each of the next five financial years after a business combination, a cash flow test should be performed that actual cash flows achieved with those projected for the purposes of the initial goodwill impairment test and potentially requiring a write down if the actual cash flows would not have supported the original carrying amount of goodwill.
• The cash generating units used for making the goodwill impairment test should be consistent with management's internal procedures for monitoring the return on the investment and, in no case, should be larger than a primary reportable segment determined in accordance with IAS 14, Segment Reporting.
• Reversals of impairment losses of goodwill should not be recognised.

Share-Based Payments: [Project Summary]

The Board discussed a number of issues relating to share-based payment, though no decisions were reached. Principal among the issues discussed was whether the date of measurement should be the grant date, service date, vesting date, or exercise date.

Improvements to IAS: [Project Summary]

Among the tentative decisions reached by the Board:

• IAS 2, Inventories. LIFO should be eliminated.
• IAS 10, Events After the Balance Sheet Date. IAS 37 should be applied in determining whether a liability for dividends should be recognised.
• IAS 16, Property, Plant and Equipment.
  --Income and related expenses of operations incidental to the construction or development of property, plant and equipment should be recognised in net profit or loss for the period. This is what had been proposed in SIC D26.
  --The cost of acquisition of property, plant, and equipment should include the estimated cost of dismantling and removing the asset and restoring the site. This is consistent with the requirement of IAS 37. --Subsequent expenditure relating to property, plant and equipment should be added to the carrying amount of the asset only if the expenditure increases the asset's future economic benefits above those reflected in its most recent previously assessed standard of performance.
  --Depreciation of property, plant and equipment should cease when the property, plant and equipment is classified as held for sale.
  
• IAS 24, Related Party Disclosures. The definition of related parties should include parties with joint control over the reporting enterprise, and joint ventures in which the reporting enterprise is a joint venturer. Guidance will be added to IAS 24 as to specific required disclosures, including disclosure of the monetary amounts of transactions and balances.

Performance Reporting: [Project Summary]

Among the tentative decisions reached by the Board:

• An entity should present a single statement of recognized income and expense as a component of a complete set of financial statements.
• The statement should include the effects of all changes in net assets during the period other than transactions with owners.
• No 'recycling' of items of recognized income and expense.

SIC D27, Lease-Leaseback Transactions: [Project Summary]

The IASB Board considered the latest draft of a proposed SIC Interpretation, Transactions in the Legal Form of a Lease and Leaseback, and concluded that the SIC should do further work on the document, including addressing the issue of derecognition of the leased asset. This is the second time that the Board has remanded D27 to the SIC without approval.

This summary is based on notes taken by observers at the IASB meeting and should not be regarded as an official or final summary.