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IAS 28 and SIC-13 — Definition of the term 'non-monetary asset'

Date recorded:

The Committee received a request to clarify the definition of the term “non-monetary asset” used in SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and IAS 28 (revised in 2011).

The submitter noted that there is an inconsistency between the guidance in IAS 27 and SIC-13 for transactions in which a parent contributes interests in a subsidiary to a joint venture/Jointly Controlled Entity (JCE) and this contribution results in a loss of control in the subsidiary by the parent. Paragraph 5 of SIC-13 restricts gains and losses arising from contributions of non-monetary assets to a JCE to the extent of the interest attributable to the other equity holders in the JCE. However paragraph 34 of IAS 27 requires full profit or loss recognition on the loss of control of the subsidiary.

Consequently, diversity in practice has emerged on the accounting for a loss of control of a subsidiary when it is contributed to a JCE. The submitter also noted that the incorporation of SIC-13 into paragraph 30 of IAS 28(2011) may introduce further diversity of practice in the future because this diversity may now be extended to contributions to associates in addition to contributions to a JCE. The submitter believes that this diversity in practice could be reduced if there were to be a clarification as to whether a business (as defined in IFRS 3) qualifies as a non-monetary asset under SIC-13 and IAS 28 (2011).

The staff recommended the Committee not take the item on to its agenda. The Committee referred to its May 2011 IFRIC Update, and noted that there were broader issues in relation to contributions to a JCE or associate in general, and it concluded that this issue would be best resolved by referring it to the Board as part of a broader project on equity accounting. The Committee tentatively decided not to add this issue to its agenda but asked the staff to revise the wording for the tentative agenda decision and to put together suggested recommendations to present to the Board. The Committee will continue to discuss this issue at the next meeting.