IFRS Interpretations Committee update (IASB only)
The staff presented the IFRIC Update newsletter for September, providing an update of the issues discussed at the 18 – 19 September IFRS Interpretations Committee (the ‘Committee’) meeting.
The staff highlighted to the IASB members the items on the Committee’s current agenda, finalised agenda decisions and new tentative agenda decisions that are out for comment and will be discussed at the January 2013 Committee meeting.
The staff specifically highlighted two items on the Committee’s current agenda; that being, variable payments for the purchase of items of property, plant and equipment or intangible assets and accounting for employee benefit plans with a promised return on contributions or notional contributions (that continued on the work on draft Interpretation D9 Employee Benefit Plans with a Promised Return on Contribution or Notional Contributions that is no longer being pursued).
There were comments raised by one IASB member as to how the current agenda item on accounting for employee benefit plans would develop into an interpretation in light of the difficulties faced with draft Interpretation D9 and the interaction with and scope of the Board discussion paper to improve pensions accounting. The staff stated that the scope would be kept narrow and focused to ensure that this is possible. Another Board member asked whether this would be an amendment to IAS 19 or an interpretation and the staff stated that the current agenda was to develop a draft interpretation.
The staff specifically highlighted two new tentative agenda decisions; that being, accounting for contingent payments to selling shareholders in circumstances in which those selling shareholders become, or continue as, employees (this has been put on hold), and presentation in the income statement of the income and expenses arising on financial instruments that have a negative yield (i.e., a negative interest rate).
One Board member questioned the presentation of this negative income as the Committee is proposing that this is not reflected in the overall return from the financial instrument but reflected elsewhere in expenses in the income statement. The member asked whether this negative income should be shown alongside the positive income (grossed up presentation) to enable a user to assess the overall return on the financial instrument. Another Board member expressed a view that the Committee recommendation may distort the calculation of the interest margin.
The staff (and another Board member) highlighted that the negative yield does not meet the Conceptual Framework definition of revenue or interest expense, but if relevant to an understanding of the entity’s financial performance, disclosure would be required.
There were no other significant comments/questions to the IFRIC Update.