Deloitte comment letter on IFRIC tentative agenda decision: 'IAS 27 — Group reorganisations in separate financial statements'
We agree with the Committee’s tentative decision not to add this item onto its agenda but wording in the tentative agenda decision requires revision for the purposes of clarity and to avoid unnecessary restrictions on an entity’s accounting policy choices in this area.
Specifically, we note the following.
- The Committee’s agenda decisions should make it clear that the treatment detailed in paragraphs 38B and 38C of IAS 27 (amended 2008) or paragraphs 13 and 14 of IAS 27 (revised 2011) is a requirement, not guidance, for group reorganisations which meet the relevant criteria.
- The Board made it clear in BC66Q of IAS 27 (amended 2008) that in amending IAS 27 it did not consider the accounting for other types of reorganisations or common control transactions more broadly and that it would expect entities to continue to apply their accounting policies to such transactions (this position was reiterated in BC27 of IAS 27 (revised 2011)).
- The Committee notes in its tentative agenda decision on business combinations involving newly formed entities that the Board has planned to address accounting for business combinations under common control transactions at a later stage and that it is too broad an issue to be addressed through an interpretation. This is also the case for group reorganisations.