Effective dates of IFRS 10, 11 and 12
Following the receipt of an unsolicited letter from the European Financial Reporting Advisory Group (EFRAG) formally requesting the extension of the effective date of IFRS 10 , IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (revised 2011) and IAS 28 Interests in Associates and Joint Ventures (revised 2011) (collectively, "the package of five"), the IASB considered a possible deferral of the package of five.
Reasons for the potential deferral of the package of five, as communicated in EFRAG's letter and other IASB staff analysis, included:
- European constituent concerns to EFRAG that the published effective date of the package of five would not provide sufficient time for full implementation.
- Two outstanding exposure drafts providing potential amendment to IFRS 10 have not been finalised; Amendments to the Transition Guidance in IFRS 10 (which provides only clarifications to the transition guidance to ease implementation requirements, and therefore, was not seen to be a significant burden in the application of IFRS 10) and Investment Entities. EFRAG noted that these exposure drafts introduce uncertainty into the requirements of IFRS 10 and could involve unnecessary efforts if the changes introduced by the exposure drafts conflict with the current interpretation and implementation of IFRS 10.
As a result of this analysis, the staff presented three possible approaches to the Board:
- retain the effective date for the package of five as annual periods beginning on or after 1 January 2013;
- retain the effective date for IFRS 12 as 1 January 2013 but defer the effective date for the other four standards to annual periods beginning on or after 1 January 2014; or
- defer the effective date for the package of five to annual periods beginning on or after 1 January 2014.
Many Board members expressed significant reservation with deferring the effective date of the package of five. Reasons expressed for this reservation included:
- IFRS 10 and IFRS 12 were published in response to the financial crisis and contain improvements to financial reporting that were requested by the G20 and the Financial Stability Board. Thus, timely adoption was seen as necessary and important.
- Many countries have already endorsed the package of five and expressed no significant concerns to the Board.
- Retaining the effective date would limit the potential for non-comparability that would result from having an extended period of optional application of the package of five.
- The 19 months between the May 2011 publication date of the package of five and January 2013 effective date represented a longer lead time than the IASB normally provides for new standard adoption.
- An adoption of IFRS 12 at 1 January 2013 with deferral of other standards in the package of five was not considered practical given that all of the new standards are interrelated.
One Board member, acknowledging the concerns of EFRAG related to currently outstanding exposure drafts impacting IFRS 10, proposed allowing a scope-specific deferral of IFRS 10 by those entities which are expected to be impacted by the Investment Entities exposure draft. However, other Board members expressed concern with this proposal, noting the difficulty in defining which entities would be subject to the deferral (e.g., is it based on the proposed investment entities definition or applying definitions set forth in IAS 28). Additionally, another Board member questioned whether the scope of the Investment Entities exposure draft would significantly impact application of IFRS 10, although acknowledging excess efforts may ensue. He noted the exposure draft's scope did not relate to the accounting for an investment entity, but rather, considered the recognition and measurement of investments made by an investment entity. Therefore, he did not believe the outstanding exposure draft should influence the effective date of the package of five.
With little additional debate, the Board tentatively decided to retain the effective date for the package of five as annual periods beginning on or after 1 January 2013.