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Due process papers (IASB only)

Date recorded:

Equity method: share of other net asset changes (amendments to IAS 28 Investments in Associates and Joint Ventures)

In July 2012, the IASB tentatively decided to publish an exposure draft proposing amendments to IAS 28. These amendments were intended to clarify the accounting by an investor for its share of changes in the net assets of an associate or joint venture that are not included in the investee’s profit or loss or other comprehensive income and are not distributions. The balloting process of Exposure Draft Equity method: share of other net asset changes (Amendments to IAS 28 Investments in Associates and Joint Ventures) (the Equity Exposure Draft), is underway and publication scheduled for November 2012.

The staff provided the IASB members with a brief summary of the proposed amendments and explained the Due Process steps that had been performed by the IASB before the publication/development of the Equity Exposure Draft. The staff specifically asked the Board members to confirm that the IASB has complied with the required Due Process requirements to date.

All of the Board members were satisfied that all of the required Due Process steps had been complied with to date.

Annual Improvements to IFRSs 2011 – 2013 Cycle

During the period February 2012 to September 2012, the IASB discussed five proposed annual improvements issues which it tentatively agreed to include in the Exposure Draft Annual Improvements Cycle 2011-2013 (Annual Improvements Exposure Draft). The five proposed amendments affect five IFRSs and the Basis for Conclusions of IFRS 1 First-time Adoption of International Financial Reporting Standards. All these issues were also discussed by the Committee except for the proposed amendment to IFRS 13 which was taken directly to the IASB because of the timing of the issue arising relative to the proposed publication date of the Exposure Draft. The balloting process is about to start for the Annual Improvements Exposure Draft, with publication scheduled for November 2012.

The staff presented to the IASB a brief summary of the proposed amendments. Specifically, the staff sought:

  • Whether any of the IASB members intended to dissent from the Annual Improvements Exposure Draft
  • To explain the steps in the Due Process that the IASB had taken before the publication of the Annual Improvements Exposure Draft and confirm that the IASB had complied with the Due Process requirements to date.
  • To recommend that the IASB should publish the Annual Improvements Exposure Draft with a comment period of not less than 120 days.

Intention to dissent

In the October IASB meeting, there were two dissenters on the grounds of the wording within the Exposure Draft.

The dissenting Board members stated that they agreed with the conclusion on IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets revenue-based depreciation but stated that the guidance negates the conclusion (i.e., the conclusion is that revenue-based depreciation is not appropriate but the guidance was contradictory to this). These Board members requested to see the final wording although one stated that he had a solution to the wording issue. The staff stated that they would consider amendments to the wording of the Annual Improvements Exposure Draft.

Due process steps

All of the Board members were satisfied that all of the required Due Process steps had been complied with to date.

Comment period

The comment period for annual improvements is usually 90 days. However, the staff proposed a period of 120 days due to the potential impact that the proposed amendments on IAS 16 and IAS 38 relating to revenue-based depreciation.

The staff noted concerns of the Due Process Oversight Committee within the last Trustees meeting that the amendments to IAS 16 and IAS 38 may not meet the criteria for an Annual Improvement. The staff noted that each of the five issues had been considered against the criteria for an Annual Improvement, including the amendments to IAS 16 and IAS 38, and the staff believed the amendments to IAS 16 and IAS 38 meet the criteria. It was suggested that this could be separately made into an exposure draft (due to the concerns of the Trustees) rather than include within the Annual Improvements Exposure Draft.

The majority of Board members tentatively agreed that the amendments to IAS 16 and IAS 38 should be published as a separate exposure draft. These amendments would have a comment period of 120 days and the remaining four issues (to be included within the Annual Improvements Exposure Draft) would have a 90 day consultation period.

Correction list for hyphenation

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