Home   Site Map   Standards   Interpretations   Agenda   Structure   Newsletter   Resources   Jurisdictions   Links   Search

IAS 27 Consolidation: SIC 12 Exemption for Equity Compensation Benefits

Go To List of IFRIC Issues Issue Description: Should the scope of SIC 12 be aligned with the scope of IAS 19 by eliminating the SIC 12 exemption for share trusts? SIC 12.6 states: "This Interpretation does not apply to post-employment benefit plans or equity compensation plans." Discussion at the IFRIC Meeting May 2004 The IFRIC discussed consolidation issues related to trusts used to undertake share-based payment transactions in accordance with IFRS 2. The IFRIC was asked and generally concluded in favour of issuing an interpretation to eliminate the scope exemption in SIC 12 for equity compensation benefits. This draft interpretation would be issued shortly. The IFRIC agreed to take on a second phase to address whether guidance should be issued on applying the consolidation model to these trusts. These issues will be discussed further at future IFRIC meetings. The IFRIC noted that the scope exemption in SIC 12 should be aligned with the scope of IAS 19. IASB Consideration June 2004 The Board considered a draft interpretation that would (a) remove the scope exemption from SIC 12 for employee share schemes and (b) clarify the scope requirements of SIC 12 relating to post-employment benefit plans. The Board did not object to IFRIC's issuing it for public comment. Draft Amendment D7 On 30 June 2004 IFRIC issued Draft Amendment D7 for public comment. Comment deadline is 13 September 2004. Discussion at the July 2004 IFRIC Meeting At its May meeting, the IFRIC began discussing issues concerning employee benefit trusts (EBTs) relating to share-based payment arrangements. The IFRIC discussed a request from the IASB to consider: 1. Whether the scope of SIC-12 Consolidation-Special Purpose Entities should be amended once IFRS 2 becomes effective, to remove the scope exclusion for equity compensation plans. This phase (step 1) culminated in the issuance of IFRIC D7 Scope of SIC-12 Consolidation - Special Purpose Entities on 30 June 2004, with a request for comments by 13 September 2004. 2. Whether any guidance should be developed on accounting for employee benefit trusts relating to share-based payment arrangements. The discussion at this meeting would focus on the second step – guidance on accounting for employee benefit trusts relating to share-based payment arrangements. The following issues were discussed but no decisions were made: The scope of the interpretation, to distinguish the employee benefit trusts covered by the interpretation from those within the scope of IAS 19 Employee Benefits. Whether any guidance should be given on determining whether an EBT is under the entity's control. Whether the EBT should be treated as a branch or a subsidiary. What guidance, if any, should be given on the consolidation process? The IFRIC discussed whether to provide guidance similar to that in the UK UITF 38 on consolidation procedures around employee compensation trusts. There was no overwhelming support that such an interpretation should receive IFRIC priority and should only be addressed (if at all) once the results of D7 were known. As a result, that feedback would be considered at the October meeting. Discussion at the October 2004 IASB Board Meeting The final amendment to SIC 12 was approved by the Board. November 2004: IFRIC Issues Amendment to SIC 12 On 11 November 2004, the IFRIC issued an amendment to the scope of Interpretation SIC 12 Consolidation–Special Purpose Entities to remove the scope exclusion for equity compensation plans. Consequently, an entity that controls an employee benefit trust (or similar entity) set up for the purposes of a share-based payment arrangement will be required to consolidate that trust. The new amendment also expands the scope exclusion in SIC-12 for post-employment benefit plans to include other long-term employee benefit plans. Click for Press Release (PDF 21k).