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IAS 27 – Contributions to a jointly controlled entity or an associate (new)

Date recorded:

The Committee has received multiple requests for clarification on an inconsistency between IAS 27 Consolidated and Separate Financial Statements and SIC-13 Jointly Controlled Entities — Non-Monetary Contributions by Venturers.

Specifically, the question focuses on when a parent loses control over a subsidiary and that subsidiary becomes part of a jointly controlled entity or an associate, does the parent recognise the full gain or loss resulting from the transaction (the IAS 27 approach) or only to the extent of the interests of the other equity holders in the jointly controlled entity or associate (the IAS 31/SIC-13 approach).

At the December 2009 IASB meeting, the Board concluded that an inconsistency does exist between the two pieces of literature. However, the Board decided not to resolve the inconsistency within the joint ventures project but to address it separately and to incorporate the requirements in SIC-13 and any guidance relating to the equity method for joint ventures as a consequential amendment to IAS 28 Investments in Associates. Additionally, the issuance of the pending consolidation standard (IFRS 10) and the consequential amendments to IAS 28 will not address this inconsistency.

The Committee acknowledged the inconsistency in guidance, but most of the Committee members felt that addressing the issue through the annual improvements process or an interpretation would not be appropriate. Concerns over addressing by the Committee were that the scope would have to be so narrow that it would not fully address the inconsistency.

There was also concern that any limited scope amendment may inadvertently create structuring opportunities.

The Committee concluded that it would recommend to the Board that the issue be addressed through either a post-implementation review or a separate agenda item.

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