IFRS 3 — Scope exclusion for the formation of a joint venture

During November 2011, the Committee discussed a question over the scope exclusion in IFRS 3 (revised 2008) related to joint ventures. The question dealt with whether paragraph 2(a) of IFRS 3 should 1) refer to 'the formation of a joint venture' or 'the formation of a joint arrangement' as the terms are used in IFRS 11 and 2) apply to the financial statements of the joint venture or joint arrangement itself, a party to the joint venture or joint arrangement or both.

The Committee recommended the Board should include a proposed amendment to paragraph 2(a) of IFRS 3 in the next exposure draft of the annual improvements.

The Board tentatively decided to propose an amendment to paragraph 2(a) of IFRS 3 to read that 'this IFRS does not apply to the accounting by a joint arrangement in its financial statements upon its formation'.

IFRS 3 — Definition of a business

During the second half of 2011, the Committee discussed the interaction of IFRS 3 and IAS 40 and whether the acquisition of investment property can be a business combination. The Committee recommended the Board include a proposed amendment to IAS 40 in the next exposure draft of the annual improvements. The Committee agreed with the staff view that IFRS 3 and IAS 40 are not mutually exclusive and that an entity has to assess whether the acquisition meets the definition of a business combination in IFRS 3 and an investment property in IAS 40.

The Board tentatively decided to propose an amendment to IAS 40 to state that 'judgement is also needed to determine whether the acquisition of investment property is the acquisition of an asset or a group of assets or a business combination within the scope of IFRS 3'. This amendment would be applied prospectively with early application permitted.