The IFRIC discussed whether to address if changes in the fair value of assets give rise to taxable temporary differences and deferred tax liabilities under IAS 12 Income Taxes.
February 2002
The IFRIC decided not to take this item onto its agenda because IAS 12 provides sufficient guidance.
IFRIC reference: IAS 12
The IFRIC discussed whether to address the tax rate to be used to measure deferred tax assets and deferred tax liabilities for entities that have low effective tax rates, eg because some income is exempt from tax.
February 2002
The IFRIC decided not to take this item onto its agenda because IAS 12 provides sufficient guidance.
IFRIC reference: IAS 12
The IFRIC considered addressing how to determine the discount rate to be used in measuring a defined benefit liability under IAS 19 Employee Benefits when there is no deep market in high quality corporate bonds, and the terms of government bonds are much shorter than the benefit obligations.
The IFRIC considered addressing how to determine the discount rate to be used in measuring a defined benefit liability under IAS 19 Employee Benefits when there is no deep market in high quality corporate bonds, and the terms of government bonds are much shorter than the benefit obligations.
February 2002
The IFRIC agreed to not take this issue onto its agenda because IAS 19 provides sufficient guidance.
IFRIC reference: IAS 19
The IFRIC considered addressing how an investor should account for an additional investment made in an associate when the equity method of accounting has been discontinued because the investor’s share of the associate’s post-acquisition losses is such that the carrying amount of the investment is nil.
February 2002
The IFRIC decided not to add this issue onto its agenda because it does not meet IFRIC’s agenda criterion of having practical and widespread relevance.
IFRIC reference: IAS 28
The IFRIC considered addressing when an entity should recognise, and how it should measure, an impairment of an asset received or another loss under a firmly committed executory contract.
February 2002
The IFRIC decided not to add this issue onto its agenda because IAS 37 and IAS 36 provide sufficient guidance.
IFRIC reference: IAS 37
The IFRIC considered addressing examples of when constructive obligations exist under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
February 2002
The IFRIC decided not to add this issue onto its agenda because IAS 37 provides sufficient guidance.
IFRIC reference: IAS 37
The IFRIC considered addressing the following:
(a) how to account for the costs of acquiring or generating information to be included in an electronic database
(b) if the costs in (a) should be capitalised, should internal and/or external costs be included, and should direct and/or indirect costs be included, and
(c) if the costs in (a) should be capitalised, how to account for the costs of maintaining and enhancing the collection.
February 2002
The IFRIC decided to not address these issues because SIC-32 Intangible Assets – Web Site Costs, and IAS 38 Intangible Assets provides sufficient guidance.
IFRIC reference: IAS 38
The IFRIC considered addressing certain issues relating to discretionary distributions and economic compulsion, that were previously reported in the May 2001 edition of News from the SIC that were related to the classification of financial instruments under IAS 32 Financial Instruments: Presentation and Disclosure.
February 2002
The IFRIC decided not to address this issue, because the economic compulsion concept was expected to be removed from IAS 32 as part of the improvements project.
IFRIC reference: IAS 39
The IFRIC considered issuing guidance on whether vested benefits that are payable when an employee left service could be recognised at an undiscounted amount (ie the amount that would be payable if all employees left the entity at the balance sheet date).
The IFRIC considered issuing guidance on whether vested benefits that are payable when an employee left service could be recognised at an undiscounted amount (ie the amount that would be payable if all employees left the entity at the balance sheet date).
April 2002
The IFRIC agreed to not issue an interpretation on this matter because the answer is clear under IAS 19 Employee Benefits. IAS 19 states that the measurement of the liability for the vested benefits must reflect the expected date of employees leaving service, and that the liability is discounted to a present value.
IFRIC reference: IAS 19
The IFRIC considered whether it should provide guidance regarding how a purchaser of goods should account for cash discounts received.
August 2002
The IFRIC agreed not to require publication of an Interpretation on this issue because paragraph 8 of (the pre-improvements) IAS 2 Inventories provides adequate guidance. Cash discounts received should be deducted from the cost of the goods purchased.
(Paragraph 8 was renumbered as paragraph 11 of IAS 2 as a result of the Improvements project)
IFRIC reference: IAS 2
The IFRIC considered providing guidance regarding when is it appropriate to recognise an asset (versus an expense) for pre-contract costs.
August 2002
The IFRIC decided not to require publication of an Interpretation on this issue because paragraph 21 of IAS 11 Construction Contracts provides guidance regarding accounting for pre-contract costs relating to construction contracts, and that this guidance can be used for analogous circumstances.
Although the IFRIC agreed not to publish an Interpretation on this issue, it noted that a great deal of care should be taken when determining whether pre-contract costs should be capitalised.
IFRIC reference: IAS 11
The IFRIC considered providing guidance on whether the whole of an investment property held under a finance lease consisting of land and buildings that is accounted for using the fair value model in IAS 40 Investment Property is a “non-depreciable asset” under SIC-21 Income Taxes – Recovery of Revalued Non-Depreciable Assets paragraph 4 (with the consequence that any deferred tax asset or liability on it should be measured at the tax rate applicable on a sale of the property).
August 2002
The IFRIC agreed not to require publication of an Interpretation on this issue because SIC–21 Income Taxes – Recovery of Revalued Non-Depreciable Assets, IAS 16 Property, Plant and Equipment, and IAS 12 Income Taxes provide adequate guidance.
IFRIC reference: IAS 12
The IFRIC considered whether to provide guidance relating to a particular insurance plan found in Sweden. In particular, whether the particular plan is a defined benefit or a defined contribution plan under IAS 19 and, if it was thought to be a defined benefit plan, whether it would qualify for the exemptions from defined benefit plan accounting available under IAS 19 for some multi-employer plans.
The IFRIC considered whether to provide guidance relating to a particular insurance plan found in Sweden. In particular, whether the particular plan is a defined benefit or a defined contribution plan under IAS 19 and, if it was thought to be a defined benefit plan, whether it would qualify for the exemptions from defined benefit plan accounting available under IAS 19 for some multi-employer plans.
August 2002
The IFRIC agreed not to require publication of an Interpretation on this issue because IAS 19 is clear that the particular plan considered is a defined benefit plan.
IFRIC reference: IAS 19
The IFRIC discussed an issue relating to the effect of rights of veto given to a third party on the assessment of whether an owner of more than half of the voting rights in an enterprise has control.
August 2002
The IFRIC agreed not to add this issue to its agenda, because the Board is expected to address this issue in the near future as part of its project on Consolidation and Special Purpose Entities.
At the February 2004 meeting, the Board tentatively agreed that holders of veto rights may negate apparent power even if
• those rights are limited to the ability to block actions if:
• those veto rights relate to operating and financing policies; and
• those veto rights relate to decisions in the ordinary course of business and not
• only to fundamental changes in the organisation (such as disposal of business units or acquisition of significant assets).
The Board will continue to discuss this issue as part of the Consolidation and Special Purpose Entities project.
IFRIC reference: IAS 28
The IFRIC considered circumstances in which A owns an interest in B, and B concurrently owns an interest in A. Those investments are known as reciprocal interests (or ‘cross-holdings’). The IFRIC discussed whether it should provide guidance as to the appropriate accounting:
(a) when the cross-holdings are accounted for using the equity method under IAS 28 Accounting for Investments in Associates (considered in August 2002)
(b) when a control relationship exists, and holdings are accounted for under IAS 27 Consolidated and Separate Financial Statements (considered in April 2003)
August 2002
Regarding (a), in August 2002 the IFRIC agreed not to require publication of an Interpretation on this issue because paragraph 20 of IAS 28 (revised 2003) requires elimination of reciprocal interests (through application of consolidation concepts).
Regarding (b), the IFRIC decided to wait until the amendments to improve IAS 27 are finalised (as part of the Business Combinations Phase II project) before considering whether to take this issue onto the agenda.
The IFRIC is expected to reconsider these issues once the Business Combinations Phase II project is finalised, as expected in 2005.
IFRIC reference: IAS 28
The IFRIC considered providing guidance on the issue regarding whether an exception from SIC-16 Share Capital – Reacquired Own Equity Instruments (Treasury Shares) should be made for own shares that are held for trading purposes in order to allow them to be measured at fair value with changes in value being reported in the income statement.
August 2002
The IFRIC agreed not to require publication of an Interpretation on this issue, because IAS 39 and SIC-16 are clear that:
(a) own shares should be treated as a deduction from equity in all circumstances,
(b) they may not be classified as an asset that is held for trading; and
(c) no gain or loss is recognised in the income statement on such shares.
These issues were considered as part of the process of improving IAS 32.
IFRIC reference: IAS 39
The IFRIC considered addressing the issue of whether exchanges of businesses or other non-monetary assets for an interest in the assets of a subsidiary, joint venture or associate should be recognised in the consolidated financial statements at:
(a) fair value as at the acquisition date, therefore recognising a gain (or loss) on ‘sale’ in the consolidated financial statements; or
(b) the pre-combination carrying amount, therefore reversing the gain (or loss) out of the consolidated financial statements; or
(c) the pre-combination carrying amount to the extent of continued ownership interest in the business or non-monetary asset, therefore recognising a gain only for the minority interest portion in the consolidated financial statements.
August 2002
The IFRIC agreed that this item should not be added to the agenda and that this issue (specifically exchanges of businesses or other non-monetary assets for an interest in a subsidiary) should be dealt with in the Board’s Business Combinations (phase II) project.
At its January 2003 meeting the IASB considered the accounting for business combinations in which consideration in the form of a business or other non-monetary asset is transferred to an entity in exchange for equity instruments issued by that entity, which thereby becomes the first entity’s subsidiary. The Board decided that the business or non-monetary asset transferred by the acquirer should not be viewed as part of the net assets acquired. This is because the acquirer controls the business or non-monetary asset both before and after the business combination. Therefore, the full amount of any profit or loss arising on the transfer to the acquiree of the business or non-monetary asset should be eliminated in the consolidated financial statements.
The Board is not considering this issue as it relates to exchanges that result in joint venture or associates relationships, because it is outside of the scope of the Business Combinations project.
The IFRIC decided to reconsider this issue after the Business Combinations (phase II) project is complete.
IFRIC reference: IFRS 3
The IFRIC considered the accounting for contingent consideration received by the seller in a business combination. The IFRIC noted that when accounting for contingent consideration received by the seller, one of the questions to consider is whether IAS 37 Provisions, Contingent Liabilities and Contingent Assets or
August 2002
The IFRIC agreed not to require publication of an Interpretation on this issue because:
(a) it is not pervasive in practice; and
(b) the Board is currently looking at contingent consideration from the purchaser’s perspective as part of its Business Combinations Phase II project.
IFRIC reference: IFRS 3
The IASB, at its October 2002 meeting, requested that the IFRIC explore whether, an appropriate interim solution would be for the IFRIC to make a limited amendment to SIC-12 Consolidation - Special Purpose Entities, in the light of the fact that the Board’s project on consolidation policies and practices (including their application to SPEs) is unlikely to result in a new Standard in the near future. The amendment would clarify that a “majority” of benefits or risks is intended to refer to exposure to the majority of the variability of expected economic outcome, rather than the absolute economic outcome. One aim of making such an amendment would be convergence towards the FASB’s approach in developing its project on SPEs.
November 2002
The IFRIC discussed this issue at its November meeting, and decided not to recommend such an amendment to SIC-12. Reasons included:
• SIC-12 is not interpreted in practice as referring to absolute economic outcome, so the limited amendment proposed would likely have little, if any, practical effect;
• There are difficult issues about exactly what is meant by variability of outcome (as well as other issues about the interpretation of SIC-12), that the IFRIC believes are best resolved by the Board in its project; and
• As the FASB’s approach was still being finalised, the IFRIC considered it premature to amend SIC-12 in any partial manner. The IFRIC’s analysis was reported to the Board at its December meeting.
An Exposure Draft on Consolidation (including Special Purpose Entities) is expected to be issued in the 4th quarter of 2004.
IFRIC reference: IAS 28
Accounting for inflation is dealt with in IAS 15 Information Reflecting the Effects of Changing Prices and IAS 29 Financial Reporting in Hyperinflationary Economies. IAS 15 encourages the voluntarily provision of supplementary information on changing prices, whereas IAS 29 requires the financial statements to be restated when certain criteria of hyperinflation are met. The Board proposed in its Improvements project to withdraw IAS 15. Further, accounting for inflation is included in the Board’s short-term Convergence Project. The IFRIC discussed various issues regarding accounting for high and hyperinflation, in order to provide the Board with input to the Improvements and Convergence projects, including:
• The potential absence of guidance on accounting for high inflation in the context of the proposed withdrawal of IAS 15
• Determining when an economy is hyperinflationary
• Practical matters raised with the IFRIC Agenda Committee, including what constitutes a general price index and presentation of comparative figures on first adopting IAS 29.
November 2002
The IFRIC agreed on a number of specific recommendations for the Board to consider in its Improvements and Convergence projects
IAS 15 was withdrawn as a result of the Improvements project. Practical issues in applying IAS 29 are being addressed as part of the IFRIC draft Interpretation D5 “Applying IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ for the First Time”.
IFRIC reference: IAS 29
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