• The staff recommendations are discussed at a non-voting meeting of IFRIC Members held the day before a regular IFRIC meeting begins. The IFRIC members present at that meeting discuss the staff recommendation and review the staff's recommended wording for IFRIC's public explanation of why an item was not added to the agenda. That informal discussion may lead to revisions to the wording or, possibly, a revised staff recommendation.
• The IFRIC discusses the staff recommendation and, if it agrees, it publishes the proposed explanation in the IFRIC Update newsletter. The newsletter indicates that if constituents disagree, they should email the IFRIC. The public has at least 30 days to comment.
• At a subsequent meeting, the IFRIC decides not to add the item to its agenda and agrees on the final wording for its explanation. IFRIC's final decision, and the explanation of why the item was not added to the agenda, are published in IFRIC Update.

In announcing its decision not to add an item to its agenda, the IFRIC states:

The following explanations are published for information only and do not change existing IFRS requirements. IFRIC agenda decisions are not Interpretations. Interpretations of the IFRIC are determined only after extensive deliberation and due process, including a formal vote. IFRIC Interpretations become final only when approved by nine of the fourteen members of the IASB.

Presented below is a summary, organised by IFRS, of items not added to IFRIC's agenda and IFRIC's public explanation of the reasons for not adding the item to its agenda.

Scroll down, or click below to view items relating to a particular IFRS:

IFRS 1 First-Time Adoption IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 4 Insurance IFRS 5 Assets Held for Sale IFRS 6 Extractive Inds. IFRS 7 Fin. Inst: Disclosure IFRS 8 Operating Segments

Framework IAS 1 Presentation IAS 2 Inventories IAS 7 Cash Flow IAS 8 Accounting Policies IAS 10 Events after Reporting Date IAS 11 Contracts IAS 12 Income Taxes IAS 14 Segments IAS 16 Property IAS 17 Leases IAS 18 Revenue

IAS 19 Employee Benefits IAS 20 Grants IAS 21 Foreign Exchange IAS 23 Borrowing Cost IAS 24 Related Party IAS 26 Pension Plans IAS 27 Consolidation IAS 28 Equity Method IAS 29 Hyperinflation IAS 30 Bank Disclosure IAS 31 Joint Ventures IAS 32 Fin. Inst. Disclosure

IAS 33 Earnings Per Share IAS 34 Interim Report IAS 35 Discontinuing Ops. IAS 36 Impairment IAS 37 Provisions IAS 38 Intangibles IAS 39 Fin. Instruments IAS 40 Investment Property IAS 41 Agriculture SIC 12 Consolidation–SPEs IFRIC 12 Service Concessions IFRIC 14 IAS 19 Asset Limit IFRIC 18 Transfers from Customers

IFRS 1: Impracticability and Translation

Issue: Two IFRS 1 questions:

• Whether the 'impracticability' exception under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors should also apply to first time adopters.
• Whether a specific exception should be granted to first-time adopters to permit entities to translate all assets and liabilities at the transition date exchange rate rather than applying the functional currency approach in IAS 21 The Effects of Changes in Foreign Exchange Rates.

Decision Not to Add: October 2004

Reason: The IFRIC considered two issues regarding first-time adoption of IFRSs:

• On the first question (should the 'impracticability' exception apply to first time adopters) the IFRIC agreed that there were potential issues, especially with respect to 'old' items, such as property, plant and equipment. However, those issues could usually be resolved by using one of the transition options available in IFRS 1.
• On the second question (allow first-time adopters to translate all assets and liabilities at the transition date exchange rate) the IFRIC agreed that the position under IFRS 1 and IAS 21 was clear, and that there was no scope for an Interpretation on this topic that would provide any relief.

IFRS 2: Employee share loan plans

Issue: What is the accounting treatment for employee share loan plans under IFRS 2? Under many such plans, employee share purchases are facilitated by means of a loan from the issuer with recourse only to the shares. Should the loan be considered part of the potential share-based payment, with the entire arrangement treated as an option, or should it be accounted for separately as a financial asset?

Decision Not to Add: November 2005

Reason: The IFRIC noted that the issue of shares using the proceeds of a loan made by the share issuer, when the loan is recourse only to the shares, would be treated as an option grant in which options were exercised on the date or dates when the loan was repaid. The IFRIC decided it would not expect diversity in practice and would not take this item onto its agenda.

IFRS 2: Share plans with cash alternatives at the discretion of the entity

Issue: Is an employee share plan in which the employer has the choice of settlement in cash or in shares, and the amount of the settlement does not vary with changes in the share price of the entity, within the scope of IFRS 2 Share-based Payment?

Decision Not to Add: May 2006

Reason: IFRS 2 defines a share-based payment transaction as a transaction in which the entity receives goods or services as consideration for equity instruments of the entity in amounts that are based on the price of equity instruments of the entity. IFRIC noted that the definition of a share-based payment transaction does not require the exposure of the entity to be linked to movements in the share price of the entity. Moreover, it is clear that IFRS 2 contemplates share-based payment transactions in which the terms of the arrangement provide the entity with a choice of settlement, since they are specifically addressed in paragraphs 41-43 of IFRS 2. The IFRIC, therefore, concluded that an employee share plan in which the employer has the choice of settlement in cash or in shares, and the amount of the settlement does not vary with changes in the share price of the entity, is within the scope of IFRS 2. Since the requirements of IFRS 2 are clear, the issue is not expected to create significant divergence in practice. The IFRIC, therefore, decided not to take the issue onto the agenda.

IFRS 2: Share plans with cash alternatives at the discretion of employees: grant date and vesting periods

Issue: What is the 'grant date' and the 'vesting date' in an employee share plan in which employees are provided a choice to have cash at one date or shares at a later date? At the date the transactions were entered into, the parties involved understood the terms and conditions of the plans including the formula that would be used to determine the amount of cash to be paid to each individual employee (or the number of shares to be delivered to each individual employee), but the exact amount of cash or number of shares would only be known at a future date.

Decision Not to Add: May 2006

Reason: IFRS 2 defines grant date as the date when there is a shared understanding of the terms and conditions. Moreover, IFRS 2 does not require grant date to be the date when the exact amount of cash to be paid (or the exact number of shares to be delivered) is known to the parties involved. Further, share-based payment transactions with cash alternatives at the discretion of the counterparty are addressed in paragraphs 34-40 of IFRS 2. Paragraph 35 of IFRS 2 states that, if an entity has granted the counterparty the right to choose whether a share-based payment transaction is settled in cash or by issuing equity instruments, the entity has granted a compound financial instrument, which includes a debt component (ie the counterparty's right to demand cash payment) and an equity component (that is, the counterparty's right to demand settlement in equity instruments). Paragraph 38 of IFRS 2 states that the entity shall account separately for goods or services received or acquired in respect of each component of the compound financial instrument. The IFRIC, therefore, believed that the vesting period of the equity component and that of the debt component should be determined separately and the vesting period of each component may be different. Since 'grant date' is defined in IFRS 2 and the requirements set out in paragraphs 34-40 of IFRS 2 are clear, the issues are not expected to create significant divergence in practice. The IFRIC, therefore, decided not to take the issue onto the agenda.

IFRS 2: Fair value measurement of post-vesting transfer restrictions

Issue: Can shares issued only to employees and subject to post-vesting restrictions be valued based on an approach that would look to an actual or synthetic market that consisted only of transactions between an entity and its employees and in which prices, for example, reflected an employee's personal borrowing rate?

Decision Not to Add: November 2006

Reason: The IFRIC noted that IFRS 2 requires consideration of actual or hypothetical transactions, not only with employees, but rather with all actual or potential market participants willing to invest in restricted shares that had been or might be offered to them. The objective under IFRS 2 is to estimate the fair value of the share-based payment, not the value from the employee's perspective. The IFRIC believed that the issue was not expected to create significant divergence in practice and that the requirements of IFRS 2 were clear. The IFRIC, therefore, decided not to take the issue onto the agenda.

IFRS 2: Incremental fair value to employees as a result of unexpected capital restructurings

Issue: If the fair value of the equity instruments granted to the employees increases after the sponsoring entity undertakes a capital restructuring that was not anticipated at the date of grant of the equity instruments, is this a modification of terms that must be reflected under IFRS 2 as an adjustment of compensation?

Decision Not to Add: November 2006

Reason: The IFRIC believed that the specific case presented was not a normal commercial occurrence and was unlikely to have widespread significance. The IFRIC, therefore, decided not to take the issue onto its agenda.

IFRS 2: Employee benefit trusts in the separate financial statements of the sponsor

Issue: The trust holds shares of the sponsoring entity that are acquired by the trust from the sponsoring entity or from the market. Acquisition of those shares is funded either by the sponsoring entity or by a bank loan, usually guaranteed by the sponsoring entity. In most circumstances, the sponsoring entity controls the employee benefit trust. In some circumstances, the sponsoring entity may also have a direct control of the shares held by the trust. The issue is whether guidance should be developed on the accounting treatment for the sponsor's equity instruments held by the employee benefit trust in the sponsor's separate financial statements.

Decision Not to Add: November 2006

Reason: The IFRIC concluded that it could not reach a consensus on this matter on a timely basis, given the different types of trusts and trust arrangements that exist. The IFRIC noted that this issue related to two active projects of the IASB: the Conceptual Framework and the revision of IAS 27 in the course of the Consolidation project. For these reasons, the IFRIC decided not to add the issue to its agenda.

IFRS 2: Transactions in which the manner of settlement is contingent on future events

Issue: How should a share-based payment be measured when the manner of settlement is contingent on either:

• a future event that is outside the control of both the entity and the counterparty; or
• a future event that is within the control of the counterparty.

Decision Not to Add: January 2010

Reason: The IFRIC noted that IFRS 2 does not provide guidance on this issue. The IFRIC concluded that it would be more appropriate for the issue to be considered as part of a post-implementation review of IFRS 2.

IFRS 3: Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture, or associate

Issue: At what amount should exchanges of businesses or other non-monetary assets for an interest in the assets of a subsidiary, joint venture, or associate be recognised in the consolidated financial statements:

• Fair value as at the acquisition date, therefore recognising a gain (or loss) on 'sale' in the consolidated financial statements; or
• The pre-combination carrying amount, therefore reversing the gain (or loss) out of the consolidated financial statements; or
• 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.

Decision Not to Add: August 2002

Reason: 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.

IFRS 3: The seller's contingent consideration

Issue: Accounting for contingent consideration received by the seller in a business combination.

Decision Not to Add: August 2002

Reason: 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 IAS 39 Financial Instruments: Recognition and Measurement applies. The IFRIC agreed not to require publication of an Interpretation on this issue because:

• it is not pervasive in practice; and
• the Board is currently looking at contingent consideration from the purchaser's perspective as part of its Business Combinations Phase II project.

IFRS 3: Non-monetary exchange of assets

Issue: Is derecognition appropriate when an entity exchanges non-monetary assets for ownership in an intermediate holding company whose only activity is to hold the original non-monetary assets?

Decision Not to Add: April 2003

Reason: The IFRIC considered an example of a transaction involving exchanges of non-monetary assets in which Company A exchanges its 13 per cent interest in Company B for a 13 per cent interest in Company C, where C's only asset is its 100 per cent holding in B. As a result, A's holding in B is held in a different legal form (ie via an intermediate holding company with no other activities), rather than held directly. The issue is whether the exchange of A's interest in B for the 13 per cent interest in C would result in derecognition of the investment in B with any gain or loss reported in profit or loss and recognition of a new investment in C. The IFRIC agreed not to publish an Interpretation on this issue because the example is relatively narrow. However, the IFRIC agreed to consider including this example in its future guidance on Reporting Linked Transactions. This issue is within the scope of a draft Interpretation considered by the IFRIC at the February 2003 meeting as part of the IFRIC project on Reporting Linked Transactions (though the draft Interpretation did not include a specific example on the topic). However, the Board has not had an opportunity to consider the IFRIC's progress on the Linkage program to date.

IFRS 3: Acquisition of a third-party interest in a subsidiary

Issue: Accounting for the acquisition by the reporting entity of a third party interest in a subsidiary.

Decision Not to Add: February 2005

Reason: The IFRIC recognised that this is an urgent issue and that there is wide divergence in current practice, but that this issue is to be addressed in the Board's Phase 2 project on Business Combinations. The IFRIC concluded that it would monitor the progress of the Board's project, and reconsider whether to add the issue to the agenda later in 2005.

IFRS 3: New entity identified as the acquirer

Issue: Whether a new entity formed to effect a business combination in which it pays cash as consideration for the business acquired could be identified as the acquirer.

Decision Not to Add: March 2006

Reason: IFRS 3.22 states that when a new entity is formed to issue equity instruments to effect a business combination, one of the combining entities that existed before the combination shall be identified as the acquirer on the basis of the evidence available. However, IFRS 3.22 does not prohibit a newly formed entity that pays cash to effect a business combination from being identified as the acquirer.

IFRS 3: 'Transitory' common control

Issue: IFRS 3 does not apply to business combinations in which all the combining entities or businesses are under common control both before and after the combination, unless that control is transitory. Is a reorganisation involving the formation of a new entity to facilitate the sale of part of an organisation a business combination within the scope of IFRS 3, because control is transitory?

Decision Not to Add: March 2006

Reason: IFRS 3.22 states that when an entity is formed to issue equity instruments to effect a business combination, one of the combining entities that existed before the combination must be identified as the acquirer on the basis of the evidence available. The IFRIC noted that, to be consistent, the question of whether the entities or businesses are under common control applies to the combining entities that existed before the combination, excluding the newly formed entity. Accordingly, the IFRIC decided not to add this topic to its agenda. The IFRIC also considered a request for guidance on how to apply IFRS 3 to reorganisations in which control remains within the original group. The IFRIC declined to add this topic to the agenda, on the basis that it is unlikely that the IFRIC would reach agreement in a reasonable period, in the light of existing diversity in practice and the explicit exclusion of common control transactions from the scope of IFRS 3.

IFRS 3: Puts or forwards received by minority interests

Issue: Are puts or forwards received by minority interests in a business combination contingent consideration?

Decision Not to Add: March 2006

Reason: Because the accounting for these arrangements is being considered by the Board as part of the current redeliberations of the proposed revised IFRS 3, the IFRIC decided not to add a project on this issue to its agenda.

IFRS 3: Reassessments of acquiree's accounting as a result of a business combination

Issue: Whether, and in what circumstances, a business combination triggers a reassessment of the acquiree's classification or designation of assets, liabilities, equity, and relationships acquired in a business combination. Examples of such reassessmentsw could include:

• whether embedded derivatives should be separated from the host contract.
• the continuation or de-designation of hedge relationships.
• classification of leases as operating or finance leases.

Decision Not to Add: May 2006

Reason: At the IASB meeting in February 2007, Board members exchanged views on this issue, and the Board decided that the issue should be dealt with within Business Combinations Phase II. Therefore, the IFRIC decided not to take this item onto its agenda.

IFRS 3: Customer-related intangible assets

Issue: Under what circumstances should an acquirer recognise a non-contractual customer relationship as an acquired intangible asset, separate from goodwill, in a business combination.

Decision Not to Add: March 2009

Reason: The IFRIC concluded that Illustrative Example IE28 that accompanies in IFRS 3 provides guidance, but acknowledged that IFRS 3 is not clear. The IFRIC concluded that the IASB should amend IFRS 3 by

• removing the distinction between 'contractual' and 'noncontractual' customer related intangible assets recognised in a business combination, and
• reviewing the indicators that identify the existence of a customer relationship in IE28 and including them in the revised standard.

IFRS 3: Acquisition-related costs in a business combination

Issue: How should an entity account for acquisition-related costs that the acquirer incurred before it applies IFRS 3 (as revised in 2008) – that is, incurred while the 2004 version of IFRS 3 was applicable – that relate to a business combination that is subsequently accounted for according to the revised IFRS. The 2004 version of IFRS 3 treated acquisition costs as part of the cost of the combination. The 2008 version treats acquisition costs as an expense.

Decision Not to Add: July 2009

Reason: The IFRIC acknowledged the different accounting for acquisition costs under the 2004 and 2008 versions of IFRS 3 and agreed that, during the transition year 2009, either the 2004 or 2008 treatment is acceptable, with disclosure of the policy adopted. Because it is a transition-year issue, the IFRIC decided not to take this item onto its agenda.

IFRS 3: Earlier application of IFRS 3

Issue: If IFES 3 is applied early, must it be applied as of the beginning of an annual period?

Decision Not to Add: July 2009

Reason: The IFRIC observed that this question should be answered in accordance with the general principles in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which would require application as of the beginning of an annual period. Because IAS 8 is clear, the IFRIC did not add the issue to its agenda.

IFRS 3: Measurement of non-controlling interest (NCI)

Issue: IFRS 3.19 gives the acquirer the choice to measure NCI either at fair value or at the non-controlling interest's share of the acquiree's identifiable net assets. Under IFRS 3 NCI includes not only minority interest in the acquiree's ordinary shares but also options, warrants, and the equity component of conveertible instruments. In a given acquisition, does the choice in IFRS 3.19 have to apply to all components of NCI or can separate choices be made for different components?

Decision Not to Add: November 2009

Reason: The IFRIC concluded that IFRS 3 is not clear in this regard. Therefore, IFRIC will recommend that IASB amend IFRS 3 as part of its annual improvements process.

IFRS 3: Unreplaced and voluntarily replaced share-based payment awards

Issue: How should an acquirer measure the acquiree's share-based payment awards that are either (a) unreplaced or (b) voluntarily replaced?

Decision Not to Add: November 2009

Reason: The IFRIC concluded that IFRS 3 is not clear in this regard. Therefore, IFRIC will recommend that IASB amend IFRS 3 as part of its annual improvements process.

IFRS 4: Discretionary participation features in insurance contracts or financial liabilities

Issue: What is the definition of a 'discretionary participation feature' for which IFRS 4 requires disclosure?

Decision Not to Add: November 2005

Reason: The IFRIC received a request for interpretive guidance on:

• the definition of a discretionary participation feature (DPF)in IFRS 4 Insurance Contracts; and
• the interaction of the liability adequacy test (paragraphs 15-19 of IFRS 4) with the minimum measurement of the guaranteed element of a financial liability containing a DPF (paragraph 35(b) of IFRS 4)

The IFRIC was informed of concerns that key disclosures regarding these features are required only in respect of items regarded as DPF. Consequently, a narrow interpretation of DPF would fail to ensure clear and comprehensive disclosure about contracts that include these features. The IFRIC noted that disclosure is particularly important in this area, given the potential for a wide range of treatments until the IASB completes phase II of the project on insurance contracts. The IFRIC noted that IFRS 4 requires an insurer to disclose information that identifies and explains the amounts in its financial statements arising from insurance contracts (paragraph 36) and information that helps users to understand the amount, timing and uncertainty of future cash flows from insurance contracts (paragraph 38).

The IFRIC also noted that the Guidance on Implementing IFRS 4 was designed to help entities to develop disclosures about insurance contracts that contain a DPF. The IFRIC decided not to add this topic to the agenda, because it involves some of the most difficult questions that the IASB will need to resolve in phase II of its project on insurance contracts. The fact that, in developing IFRS 4, the IASB chose to defer such questions to phase II limits the scope for reducing diversity through an Interpretation.

IFRS 4: Scope Issue for REITs (also IAS 32)

Issue: In some jurisdictions, for a Real Estate Investment Trust (REIT) to obtain preferential tax treatment, it must distribute a minimum percentage of its income to investors. The remaining income may be distributed at the discretion of management. The issue is whether the discretion to distribute the remaining REIT income meets the definition of a Discretionary Participation Feature (DPF) as defined in IFRS 4. If the DPF definition is met, IFRS 4 permits the ownership units to be classified as a liability, rather than assessing the instrument for financial liability and equity components in accordance with IAS 32.

Decision Not to Add: January 2010

Reason: The IFRIC noted that the definition of DPF in Appendix A of IFRS 4 requires, among other things, that the instrument provides the holder with guaranteed benefits and that the DPF benefits are additional to those guaranteed benefits. Furthermore, the IFRIC noted that there must be guaranteed benefits to the holder for the definition to be met and that such guaranteed benefits are typically those present in insurance activities. The IFRIC concluded that providing guidance on this issue would be in the nature of application guidance, rather than interpretative guidance. Consequently, the IFRIC decided not to add the issue to its agenda.

IFRS 5: Plan to sell the controlling interest in a subsidiary

Issue: How should IFRS 5 be applied when an entity is committed to a plan to sell the controlling interest in a subsidiary? Specifically:

1. What triggers classification of the subsidiary's assets and liabilities as held for sale under IFRS 5?
2. When classification as held for sale is required, should all the subsidiary's assets and liabilities be classified as held for sale or only the portion to be sold?
3. Is classification as a discontinued operation relevant when the entity plans to retain significant influence over its former subsidiary after the sale?
4. After the sale, how should the remaining non-controlling equity investment be measured?

Decision Not to Add: July 2007

Reason:

• In considering the first two issues, the IFRIC noted that paragraph 6 of IFRS 5 states: 'An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use' [emphasis added]. The IFRIC decided to recommend to the Board that it amend IFRS 5 to clarify whether the criteria for classification as held for sale are met for all of a subsidiary's assets and liabilities when the parent is committed to a plan that involves loss of control over the subsidiary. The IFRIC believed that IFRS 5 should be amended to clarify that having a plan that meets the conditions in IFRS 5 involving loss of control over a subsidiary should trigger classification as held for sale of all the subsidiary's assets and liabilities.
• On the third issue, the IFRIC noted that a disposal group classified as held for sale will also be a discontinued operation if the criteria of paragraph 32 of IFRS 5 are met. Because the IFRIC did not expect divergence to emerge in practice, it decided not to address the issue.
• The IFRIC noted that the last issue is being considered in the Board's project on business combinations and, therefore, decided not to address that issue.

IFRS 5: Disclosures

Issue: Do the disclosure requirements of other standards, in the absence of specific exclusion, apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations in accordance with IFRS 5? Or does IFRS 5 and other standards that specifically relate to such assets and operations set out all of the required disclosures for those assets or operations?

Decision Not to Add: September 2007

Reason: The IFRIC concluded that this issue could be resolved efficiently through an amendment to clarify IFRS 5 and decided to draw the issue to the attention of the Board rather than taking the item on to its own agenda. The IFRIC also believed that such an amendment should generally reflect the view that IFRS 5 and other standards that that specifically relate to such assets and operations set out all of the required disclosures for those assets or operations, although additional disclosures about such assets (or disposal groups) may be necessary to comply with the general requirements of IAS 1 Presentation of Financial Statements.

IFRS 5: Write-down of a disposal group

Issue: IFRS 5 requires that a disposal group should be measured at lower of its carrying amount and fair value less costs to sell. How is that principle applied if the difference between the carrying amount and the fair value less costs to sell exceeds the carrying amount of the non-current assets?

Decision Not to Add: November 2009

Reason: The IFRIC concluded that there appears to be an internal inconsistency within IFRS 5. On the one hand, IFRS 5.23 requires that the impairment loss be allocated to reduce the carrying amount of the disposal group's non-current assets. On the other hand, IFRS 5 requires that the disposal group be reduced to fair value less costs to sell. The inconsistency cannot be resolved by Interpretation. Therefore, IFRIC will recommend that IASB amend IFRS 5.

IFRS 6: Intent in limiting the scope of IFRS 6 to exploration and evaluation

Issue: Whether the limited scope of IFRS 6 on exploration and evaluation (E&E) activities (a) reflected the Board's intention to impose limits on current national GAAP practices only in respect of activities conducted in the E&E phase, while permitting industry practices in other extractive industry areas (eg, development and exploitation) to continue unchanged, or (b) whether the IASB focused only on E&E activities because it was the only area for which the IASB was willing to grant some relief from the hierarchy for selection of accounting policies in IAS 8. Under the latter view, the IAS 8 hierarchy would apply fully to an entity's selection of IFRS accounting policies for activities outside of the E&E phase.

Decision Not to Add: January 2006

Reason: The agenda submission to IFRIC identified some inconsistencies between current extractive industry full-cost accounting practices in respect of development and exploitation activities but questioned whether the IASB intended to require change from current practices in these areas in advance of a comprehensive extractive industry project. The IFRIC noted that the effect of the limited scope of IFRS 6 was to grant relief only to policies in respect of E&E activities, and that this relief did not extend to activities before or after the E&E phase. The Basis for Conclusions in IFRS 6 includes the Board's intention of limiting the need for entities to change their existing accounting policies for E&E activities. The IFRIC believed it was clear that the scope of IFRS 6 consistently limited the relief from the hierarchy to policies applied to E&E activities and that there was no basis for interpreting IFRS 6 as granting any additional relief in areas outside its scope. Therefore, the IFRIC believed that diversity in practice should not become established and decided not to add the issue to its agenda.

IFRS 7: Presentation of 'net finance costs' on the face of the income statement

Issue: Does IFRS 7 change IFRIC's previous conclusion that paragraphs 32 and 81 of IAS 1 Presentation of Financial Statements preclude the presentation of 'net finance costs' on the face of the income statement unless finance costs and finance revenue are also shown on the face of that statement?

Decision Not to Add: November 2005

Reason: The IFRIC concluded that IFRS 7 did not change its previous conclusion. Consequently, the IFRIC decided not to take the issue onto its agenda.

IAS 1: Operating and ordinary activities

Issue: Possible guidance on the types of items that would not be included in 'operating activities' and 'ordinary activities' if those subtotals are reported in the income statement.

Decision Not to Add: February 2003

Reason: The Board, in its Exposure Draft of Improvements to IAS 1 proposed deleting the requirement that the line items: 'the results of operating activities' and 'profit or loss from ordinary activities' be presented. Because some entities are likely to continue presenting these line items, either voluntarily or because they are required to (for instance, by local law), the IFRIC discussed whether it would be appropriate for it to give guidance on the types of items that would or would not be included in operating activities and ordinary activities. The IFRIC agreed not to take this item on its agenda because it would be best dealt with as part of the joint IASB / FASB project on Reporting Comprehensive Income.

IAS 1: Normal operating cycle

Issue: For the purpose of classifying assets as current and non-current assets, is the guidance on normal operating cycle in IAS 1.57(a) was applicable only if an entity has a predominant operating cycle?

Decision Not to Add: June 2005

Reason: This issue is particularly relevant to the inventories of conglomerates which, on a narrow reading of the wording, might always have to refer to the twelve-month criterion in IAS 1.57(c), rather than the operating cycle criterion. The IFRIC decided not to consider the question further because, in its view, it was clear that the wording should be read in both the singular and the plural and that it was the nature of inventories in relation to the operating cycle that was relevant to classification. Furthermore, if inventories of different cycles were held, and it was material to readers' understanding of an entity's financial position, then the general requirement in IAS 1.71 already required disclosure of further information.

IAS 1: Comparatives for prospectuses

Issue: Should the requirements in IAS 1.36 relating to comparative information be amended because of perceived practical problems in complying with EU requirements for prospectuses?

Decision Not to Add: June 2005

Reason: The IFRIC decided not to take the item onto its agenda because it believed that the issue involved a difference of approach between IAS 1 and certain regulatory requirements that were not capable of being resolved merely by issuing an interpretation of IAS 1.

IAS 1: Classification of liability component of a convertible

Issue: Should the liability component of a convertible instrument be classified as current or non-current? Decision Not to Add: November 2006

Reason: The IFRIC concluded that IFRSs support both answers. On the one hand, if cash will not be paid in the next 12 months, an obligation is non-current. On the other hand, under IAS 32, a financial liability may be settled through the delivery of a the issuer's own equity instruments (that is, settlement of a liability is not confined to delivery of cash or other assets). Conversion of a convertible instrument could happen in the next 12 months. The IFRIC decided that both rationales should be drawn to the attention of the Board with a request for clarification. Meanwhile, the IFRIC decided not to take the issue onto its own agenda.

IAS 1 and IAS 39: Current or non-current presentation of derivatives classified as 'held for trading' under IAS 39

Issue: Should derivatives that are classified as held for trading in accordance with IAS 39 be presented as current or non-current on the face of the balance sheet date? Such derivatives may be settled more than one year after the balance sheet date. Decision Not to Add: May 2007

Reason: Because IAS 39 addresses only recognition and measurement of financial instruments, the 'held-for-trading' classification is not intended as presentation guidance. Guidance on current or non-current classifications is set out in paragraphs 56-62 of IAS 1. The IFRIC noted, however, that some might intrpret IAS 1 paragraph 62 as implying that held-for-trading items should always be presented as current. Therefore, the IFRIC agreed to recommend that the Board make a minor amendment to IAS 1.62 through the Board's annual improvements process to remove that implication.

IAS 2: Cash discounts

Issue: Should cash discounts received be deducted from the cost of the goods purchased?

Decision Not to Add: August 2002

Reason: 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)

IAS 2: Consumption of inventories by service organisations

Issue: How to assess net realisable value when the inventory is consumed as part of the service rendered (for example, cellular phone companies give subscribers free handsets in exchange for a fixed-term supply contract).

Decision Not to Add: March 2004

Reason: The IFRIC noted that the same issues existed for commercial entities. The IFRIC concluded that this matter was one of assessing the recoverability of an asset without a direct cash flow. The IFRIC agreed that such entities use inventory to generate a future revenue stream. As such, they should be accounted for similar to other items of inventory.

IAS 2: Discounts and rebates

Issue: The IFRIC considered three related questions on the application of IAS 2 which had been referred to it by the Urgent Issues Group (UIG) of the Australian Accounting Standards Board:

• (a) whether discounts received for prompt settlement of invoices should be deducted from the cost of inventories or recognised as financing income;
• (b) whether all other rebates should be deducted from the cost of inventories. The alternative would be to treat some rebates as revenue or a reduction in promotional expenses; and
• (c) whether volume rebates should be recognised only when threshold volumes are achieved, or proportionately where achievement is assessed as probable.

Decision Not to Add: November 2004

Reason:

On (a), the IFRIC agreed that settlement discounts should be deducted from the cost of inventories. Because the requirements under IFRS were sufficiently clear, the IFRIC agreed that the matter should not be added to the agenda.

On (b), the IFRIC agreed that IAS 2 requires only those rebates and discounts that have been received as a reduction in the purchase price of inventories to be taken into consideration in the measurement of the cost of the inventories. Rebates that specifically and genuinely refund selling expenses would not be deducted from the costs of inventories. Because the requirements under IFRS were sufficiently clear, the IFRIC agreed that the matter should not be added to the agenda.

On (c), the IFRIC agreed that there was insufficient evidence of diversity in practice to warrant the matter being added to the agenda.

IAS 7: Classification of treasury shares in the consolidated cash flow statement

Issue: How should treasury shares be classified in the cash flow statement?

Decision Not to Add: April 2003

Reason: Four scenarios were considered concerning the classification of treasury shares in the consolidated cash flow statement, under IAS 7:

• a subsidiary purchases (sells) shares of its parent;
• the parent entity purchases (sells) shares of its subsidiary from (to) minority interest holders;
• the subsidiary issues shares to minority interest holders; and
• the subsidiary purchases its own shares from minority interest holders.

While the IFRIC noted that conclusions could be drawn that were consistent with the current accounting for transactions with minority interest holders, it also noted that this accounting will probably change, given the Board's tentative decision that transactions between majority and minority interest holders are equity transactions. Therefore, the IFRIC agreed that the issue should be passed to the Business Combinations Phase II team for consideration of consequential amendments to IAS 7. The classification of cash-flows arising from these scenarios has been addressed in the 1st draft of amendments to IAS 27 Consolidated and Separate Financial Statements resulting from phase II of the Business Combinations project (as a consequential amendment to IAS 7).

IAS 7: Value added tax

Issue: Should cash flows reported in accordance with IAS 7 be measured as inclusive or exclusive of value added tax (VAT)?

Decision Not to Add: August 2005

Reason: There was evidence that different practices will emerge, the differences being most marked for entities that adopt the direct method of reporting cash flows. IAS 7 does not explicitly address the treatment of VAT. The IFRIC noted that it would be appropriate in complying with IAS 1 Presentation of Financial Statements for entities to disclose whether they present their gross cash flows as inclusive or exclusive of VAT. The IFRIC decided that it should not develop an Interpretation on this topic, because while different practices may emerge, they are not expected to be widespread. The IFRIC will recommend to the IASB that the treatment of VAT should be considered as part of the review of IAS 7 being carried out within the project on performance reporting.

IAS 7: Classification of Expenditures as Investing or Operating

Issue: What should be the criteria for classifying expenditures as 'operating' or 'investing' in the statement of cash flows?

Decision Not to Add: March 2008

Reason: The IFRIC agreed not to add the item to the agenda, but refer it to the Board, as IAS 7 was considered ambiguous in this respect. The question had come to IFRIC in the context of cash flows relating to exploration and evaluation activities in the extractive industries, but the staff concluded this could be extended on many situations. The agenda decision also contains a recommendation to the Board that classification in the statement of cash flows should follow recognition, that is, only expenditure for an asset recognised in the statement of financial position qualifies for classification as 'investing' in the statement of cash flows.

IAS 7: Determination of cash equivalents

Issue: Should investments in shares or units of money market funds that are redeemable at any time can be classified as cash equivalents?

Decision Not to Add: July 2009

Reason: The IFRIC noted under IAS 7 the amount of cash that will be received must be known at the time of the initial investment, ie the units cannot be considered cash equivalents simply because they can be converted to cash at any time at the then market price in an active market. The IFRIC also noted that an entity would have to satisfy itself that any investment was subject to an insignificant risk of changes in value for it to be classified as a cash equivalent. Because IAS 7 is clear, the IFRIC decided not to add this item to its agenda.

IAS 11: Pre-contract costs

Issue: Possible guidance on when is it appropriate to recognise an asset (versus an expense) for pre-contract costs.

Decision Not to Add: August 2002

Reason: 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.

IAS 11: Project accounting - contractee's accounting

Issue: Possible guidance on the proper accounting by the contractee as a construction project develops from contract signature to completion.

Decision Not to Add: September 2004

Reason: The IFRIC agreed not to add this topic to the agenda, as the issue was one of application rather than principle. Also, there was no convincing evidence of widespread problems in practice.

IAS 11: Construction Contracts and IAS 18 Revenue - Pre-completion contracts for the sale of residential properties

Issue: Do 'pre-completion contracts', as that term is used by the Urgent Issues Group of the Australian Accounting Standards Board in Abstract 53 Pre-completion Contracts for the Sale of Residential Development Properties, meet the definition of a construction contract in IAS 11?

Decision Not to Add: November 2004

Reason:

The IFRIC agreed that pre-completion contracts might not meet the definition of construction contracts set out in IAS 11 because the contracts in question are not specifically negotiated for the construction of residential units. Rather, they are agreements for the purchase and sale of such units. In addition, when pre-completion contracts did not meet the definition, the guidance in IAS 18 would prohibit revenue recognition before legal title is transferred, if the risks and rewards of ownership did not pass to the buyer before then. The IFRIC agreed that the issue should not be added to the agenda. The IFRIC noted that the definition of a construction contract in IAS 11 was sufficiently clear on this matter; it did not include typical pre-completion contracts and further guidance was not required. The IFRIC also has a project on its agenda seeking to clarify the criteria for combining and segmenting contracts. The features of pre-completion contracts that might have a relevance to the criteria for combining contracts could be considered as part of that project. The Board is also undertaking a project on revenue recognition, which will address revenue recognition on real estate transactions. The IFRIC agreed that, in the meantime, the guidance in the Appendix to IAS 18 is sufficient to prevent premature recognition of revenue on pre-completion contracts.

IAS 11: Allocation of profit in a single contract

Issue: Is it appropriate in a single contract to determine different profit margins for the different components of the contract? Decision Not to Add: November 2006

Reason: The IFRIC noted that, for a single contract for construction and other services not directly related to construction activities, IAS 18 paragraphs 4 and 13 require the contract to be separated into two components, a construction component within the scope of IAS 11 and a service component within the scope of IAS 18, in order to reflect the substance of the transaction. The IFRIC noted that the segmenting criteria of IAS 11 apply only to the progressive recognition of margin relating to the construction component and that the requirements of paragraph 13 of IAS 18 apply to the service component. The consequence is that different profit margins might be recognised on the different components of such a single contract

IAS 12: Asset revaluation

Issue: Do changes in the fair value of assets give rise to taxable temporary differences and deferred tax liabilities under IAS 12?

Decision Not to Add: February 2002

Reason: The IFRIC decided not to take this item onto its agenda because IAS 12 provides sufficient guidance.

IAS 12: Effective tax rates

Issue: Which tax rate should be used to measure deferred tax assets and deferred tax liabilities for entities that have low effective tax rates, for example, because some income is exempt from tax?

Decision Not to Add: February 2002

Reason: The IFRIC decided not to take this item onto its agenda because IAS 12 provides sufficient guidance.

IAS 12 and IAS 40: Non-depreciable and depreciable assets

Issue: 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)?

Decision Not to Add: August 2002

Reason: The IFRIC agreed not to require publication of an Interpretation on this issue because SIC-21 , IAS 16, and IAS 12 provide adequate guidance.

IAS 12: Income tax - omnibus

Issue: Whether the IFRIC should add six deferred tax issues (described below) to its agenda.

Decision Not to Add: February 2003

Reason: The IFRIC noted that all of the issues would potentially be affected by the Board's short-term convergence project on IAS 12. The IFRIC agreed to await the Board's decision on the scope of that project before deciding whether to proceed with these agenda items. The six issues, and IFRIC's reasoning, are:

• Issues 1-3: Issues 1-3 concern whether, and how, entities should apply the exemption from recognising deferred tax on initially recognising assets and liabilities.

  Reasons Issue 1-3: The IASB has tentatively decided to amend IAS 12 to eliminate the 'initial recognition exception'. Accordingly, the IFRIC declined to take this item onto the agenda.

• Issue 4: Any entity issues an equity instrument, any payments made under which will be deductible against taxable profits. Should the entity recognise a deferred tax asset on recognising an equity instrument, and should the income tax benefit arising on any payments made under the instrument be recognised in income or equity?

  Reasons Issue 4: The IFRIC agreed that the underlying issue was how to account for the tax consequences of distributions to external shareholders. The IFRIC observed that the accounting for tax-deductible dividends is explicit in IAS 12. Paragraph 52B of IAS 12 states:

  "the income tax consequences of dividends are recognised when a liability to pay the dividend is recognised. The income tax consequences of dividends are more directly linked to past transactions or events than to distributions to owners. Therefore, the income tax consequences of dividends are recognised in net profit or loss for the period as required by paragraph 58 except to the extent that the income tax consequences of dividends arise from the circumstances described in paragraph 58 (a) and (b)."

  The Board reaffirmed at the April 2003 meeting that the tax consequences of dividends are recognised when a liability to pay the dividend is recognised. Accordingly, the IFRIC agreed that no further consideration of this issue is necessary.

• Issue 5: An entity purchases an option on its own shares and classifies it as an equity instrument. For tax purposes, the cost of the option will be deductible against future taxable profits at some point in the future. Should an entity recognise a deferred tax asset on recognising the equity instrument?

  Reasons Issue 5: At the June 2004 meeting, the Board tentatively agreed to modify the definition of tax base in IAS 12 to explain that tax base is a measurement attribute and is the amount at which an asset, liability or equity instrument is recognised for tax purposes under existing tax law as a result of one or more past events. Accordingly, an entity would recognise deferred tax for temporary differences arising on equity instruments. The IFRIC agreed that no further consideration of this issue was necessary.

• Issue 6: Certain tax jurisdictions compute tax liabilities on a territorial rather than a worldwide basis, so that overseas income is not taxable unless it is repatriated. If the entity does not intend to repatriate the overseas interest income, and therefore does not expect to be liable to domestic taxation, should it recognise a deferred tax liability?

  Reasons Issue 6: The IFRIC agreed that IAS 12 requires recognition of a deferred tax liability. The current exception in IAS 12 relates to differences between the carrying amount of investments in subsidiaries, branches and associates or interests in joint ventures that result primarily from undistributed earnings. The exception does not apply to the temporary differences that exist between the carrying amount and tax base of the individual assets and liabilities within the subsidiary, branch, associate or interest in joint ventures. Additionally, the Board has tentatively decided to eliminate this exception. Thus, the IFRIC agreed to take no further action.

IAS 12: Income tax accounting under the Tax Consolidation System – Subsidiary leaving the group

Issue: The issue concerns the recognition and measurement of tax assets and tax liabilities under the tax consolidation system where a wholly owned subsidiary leaves, or is expected to leave, the tax-consolidated group.

Decision Not to Add: April 2003

Reason: The IFRIC noted that this issue was relevant only to separate (rather than consolidated) financial statements, and that it would be difficult to provide guidance that could be applied consistently by entities, given that tax laws in each jurisdiction are different. For these reasons, the IFRIC agreed not to add this issue onto the agenda.

IAS 12: Carryforward of unused tax losses and tax credits

Issue: The IFRIC considered whether to provide guidance on how to apply the probability criterion for the recognition of deferred tax assets arising from the carryforward of unused tax losses and unused tax credits, and in particular whether the criterion should be applied to the amount of unused tax losses or unused tax credits taken as a whole or to portions of the total amount.

Decision Not to Add: June 2005

Reason: The IFRIC decided not to develop any guidance because, in practice, the criterion is generally applied to portions of the total amount. The IFRIC was not aware of much diversity in practice.

IAS 12: Discounting of current taxes payable

Issue: Is it appropriate to discount current taxes payable under IFRSs when an agreement with the taxing agency has been reached to permit the entity to pay such taxes over a period greater than twelve months?

Decision Not to Add: June 2004

Reason: The general view of the IFRIC was that current taxes payable should be discounted when the effects are material. However, it was noted that there is a potential conflict with the requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. As the IASB has tentatively decided to withdraw IAS 20, the members agreed that the issue of discounting current taxes payable should no longer be uncertain and that the topic need not be added to its agenda.

IAS 12: Classification of interest and penalties

Issue: How to classify interest and penalties that arise from unpaid tax obligations.

Decision Not to Add: June 2004

Reason: While the IFRIC agreed that IFRSs did not specifically address the issue, it declined to add the issue to its agenda given that the disclosure requirements of IAS 12 and IAS 1 Presentation of Financial Statements provide adequate transparency of these items.

IAS 12: Estonian dividend tax

Issue: The IFRIC considered whether the tax on dividends under Estonian Income Tax Law should be recognised:

• In profit or loss, in accordance with paragraphs 52A and 52B of IAS 12 Income Taxes; or
• Directly in equity, in accordance with paragraph 65A of IAS 12.

Decision Not to Add: July 2004

Reason:

IFRIC members expressed concern about taking onto its agenda a request to interpret a specific tax system, particularly as the features of the Estonian tax system are not particularly widespread or pervasive throughout the world. IFRIC members also noted that the Board of the IASC discussed the Estonian tax system during deliberations of amendments to IAS 12 in 2000.

IAS 12: Deferred tax relating to finance leases

Issue: The IFRIC considered the treatment of deferred tax relating to assets and liabilities arising from finance leases.

Decision Not to Add: June 2005

Reason: While noting that there is diversity in practice in applying the requirements of IAS 12 to assets and liabilities arising from finance leases, the IFRIC agreed not to develop any guidance because the issue falls directly within the scope of the Board's short-term convergence project on income taxes with the FASB. An exposure draft is expected later this year.

IAS 12: Non-amortisable intangible assets

Issue: Should IFRIC develop guidance on various issues arising from the application of IAS 12 to nonamortised intangible assets, including the question of what tax rate should be applied to calculate deferred tax on intangible assets that are no longer to be amortised because of changes to accounting standards? The IFRIC also considered the relevance of SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable Assets.

Decision Not to Add: August 2005

Reason: The IFRIC decided not to develop an Interpretation on this topic because the issues fell within the scope of the IASB's short-term convergence project with the FASB. An exposure draft is expected later this year. In response to concerns that the IAS 8 hierarchy requires an analogy to be made to the requirements of SIC-21 in all situations involving assets measured at fair value, the IFRIC noted that SIC-21 has a limited scope that does not address this particular issue.

IAS 12: Single asset entities

Issue: The IFRIC considered the application of IAS 12 to single asset entities, and whether the expected manner of recovery of the asset should in any circumstances reflect disposal of the entity rather than the asset.

Decision Not to Add: November 2005

Reason: The IFRIC decided not to take this item onto its agenda because the issue falls directly within the scope of the IASB's short-term convergence project on income taxes with the FASB. An exposure draft is expected in 2006.

IAS 12: Scope

Issue: Which taxes are within the scope of IAS 12.

Decision Not to Add: March 2006

Reason: The IFRIC noted that IAS 12 applies to income taxes, which are defined as taxes that are based on taxable profit. That implies that (i) not all taxes are within the scope of IAS 12 but (ii) because taxable profit is not the same as accounting profit, taxes do not need to be based on a figure that is exactly accounting profit to be within the scope. The latter point is also implied by the requirement in IAS 12 to disclose an explanation of the relationship between tax expense and accounting profit. The IFRIC further noted that the term 'taxable profit' implies a notion of a net rather than gross amount. Finally, the IFRIC observed that any taxes that are not in the scope of IAS 12 are in the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. However, the IFRIC also noted the variety of taxes that exist world-wide and the need for judgement in determining whether some taxes are income taxes. Because guidance beyond the observations noted above could not be developed in a reasonable period of time, the IFRIC decided not to add this issue to its agenda.

IAS 12: Unremitted foreign income

Issue: Should an entity recognise a deferred tax liability in respect of temporary differences arising because foreign income is not taxable unless remitted to the entity's home jurisdiction?

Decision Not to Add: July 2007

Reason: The IFRIC noted that the Board is currently considering the recognition of deferred tax liabilities for temporary differences relating to investments in subsidiaries, branches, associates and joint ventures as part of its Income Taxes project. The Board's project team has been informed of the issue raised with the IFRIC. Since the issue is being addressed by a Board project that is expected to be completed in the near future, the IFRIC decided not to add the issue to its agenda.

IAS 12: Classification of tonnage taxes by shipping companies

Issue: Is a tax payable by a shipping company based on tonnage capacity an income tax when the company can choose between paying a tonnage tax and an income tax?

Decision Not to Add: May 2009

Reason: Under IAS 12, income tax is a tax based on a measure of net profit, not gross receipts. A tonnage tax is a tax based on a gross, rather than net, measure of results of operations. The IFRIC decided not to add the issue to its agenda because it concluded that IAS 12 is clear in this regard.

IAS 16: Depreciation of fixed assets

Issue: The Committee considered a potential issue as to whether the production method of depreciation could be used under IAS 16 if an asset is not consumed (worn down) directly in relation to the level of use. For example, if a road with a greater capacity than current demands is built, should depreciation in the initial period be lower than in later periods, if usage is expected to increase over the life of the asset?

Decision Not to Add: May 2004

Reason: The IFRIC agreed that this was foremost a conceptual area, and decided not to add it to the IFRIC agenda. However, the IFRIC recommended that this topic be considered by the Board as part of the Concepts project.

IAS 16 and IAS 17: Depreciation of assets leased under operating leases

Issue: The IFRIC considered whether interest methods of depreciation were permissible under IFRSs.

Decision Not to Add: November 2004

Reason: Use of interest methods would permit an entity to depreciate an asset that is not a receivable in much the same way as if it were a receivable, with the result that the depreciated amount of the asset reflects the present value of future net cash flow expected from it. The IFRIC noted that, while deliberating certain issues related to service concessions, it had considered whether it would be appropriate to use an interest method of depreciation. In that discussion, it concluded that using an interest method of depreciation was not appropriate. The IFRIC concluded that there was nothing unique about assets leased under operating leases in service concessions that would cause it to reach a different conclusion about the use of interest methods of depreciation. It noted that the Basis for Conclusions in the future Interpretations on service concessions would include a discussion of its conclusions on interest methods of depreciation.

IAS 16: Revaluation of investment properties under construction

Issue: Is the revaluation model in IAS 16 available for investment property under construction? Decision Not to Add: November 2006

Reason: The IASB has agreed that, as part of its Annual Improvements Project for 2006, the Board would propose amending IAS 16 and IAS 40 to state that investment property under construction should be accounted for under IAS 40. Since the issue is being resolved by the Board, the IFRIC decided not to take the issue onto its agenda.

IAS 16: 'Gross' or 'net' presentation of sale of assets held for rental

Issue: Should the sale of an asset that has previously been rented to third parties be presented 'gross' (revenue and costs of sales) or 'net' (gain or loss) in the income statement? Decision Not to Add: May 2007

Reason: IFRSs seem to suggest that both gross and net presentation are acceptable:

• Net: IAS 16.68 states that gains arising from derecognition of an item of property, plant and equipment shall not be classified as revenue.
• Gross: Reporting gross revenue in the income statement would be consistent with the Framework paragraph 72, with IAS 18 Revenue, IAS 2 Inventories, and IAS 40 Investment Properties, and with the prohibition on offsets in IAS 1 Presentation of Financial Statements.

IAS 16: Disclosure of idle assets and idle construction in progress

Issue: What disclosures are required relating to property, plant and equipment that is temporarily idle or assets under construction when additional construction has been postponed? Decision Not to Add: May 2009

Reason: Although IAS 16.79(a) encourages – but does not specifically require – an entity to disclose the amount of property, plant and equipment that is temporarily idle, IAS 1.112(c) requires disclosure of additional information that is relevant to an understanding of the financial statements. The IFRIC felt that entities are likely to conclude that disclosure of idle assets and idle construction in progress is relevant to understanding the financial statements. For this reason, the IFRIC decided that an Interpretation is not needed to say so.

IAS 17: Contracts for sale of capacity

Issue: Some 'sales' contracts, such as those found in the telecommunications and electricity industries, convey to the purchaser a right to use some or all of the capacity of a network operated by the seller for an agreed period. The IFRIC considered addressing the issue of contracts for sales of capacity and, in particular:

• Should the seller derecognise the asset recognised for the capacity sold?
• When should income from the sales be recognised?
• Should the treatment of sales be the same when all or part of the consideration received is capacity on another entity's network?
• Should the seller present the consideration received or receivable from a sale as revenue or another form of income?

Decision Not to Add: October 2003

Reason:

The IFRIC decided to defer consideration of whether to address this issue until after it finalises its Interpretation on Determining Whether an Arrangement Contains a Lease. Draft Interpretation D3 Determining whether an Arrangement contains a Lease was issued by the IFRIC in January 2004, with a comment deadline of 19 March 2004. Redeliberation of the Draft Interpretation commenced in May 2004. The IFRIC is expected to vote on a final Interpretation at its October 2004 meeting.

IAS 17: Finance subleases of finance leases

Issue: The IFRIC considered a suggestion that IAS 17 needed interpretation when assets obtained under finance leases (eg, from manufacturers) are in turn leased immediately by intermediaries, in finance leases, to end users. This was because there was a possibility of the intermediaries treating the assets as inventory when received from the manufacturer followed by a sale to the end user.

Decision Not to Add: June 2005

Reason: The IFRIC took the view that this issue was covered adequately by IAS 17's guidance for finance leases (both for the intermediary in its capacity as a lessee and a lessor and for the end user as a lessee) and by the derecognition requirements of IAS 39 (paragraphs 39-42) as they apply to the finance lease liabilities of the intermediary. The IFRIC did not agree with the treatment that had been suggested.

IAS 17: Recognition of operating lease incentives under SIC-15

Issue: The IFRIC considered the appropriate period over which to recognise an incentive for an operating lease, when an incentive is provided and the lease contains a clause that requires rents to be repriced to market rates. Two possible approaches for the period over which to recognise the incentive are:

• Recognise the incentive over the full term of the operating lease; or
• Recognise the incentive over the shorter of the lease term and a period ending on a date from which it is expected the prevailing market rentals will be payable.

Decision Not to Add: August 2005

Reason: The IFRIC noted that SIC-15.5 requires: "the lessee shall recognise the aggregate benefit of incentives as a reduction of rental expense over the lease term, on a straight-line basis unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset." The IFRIC thought the wording of SIC-15.5 was clear and did not accept an argument that the lease expense of a lessee after an operating lease repriced to market ought to be comparable with the lease expense of an entity entering into a new lease at that same time at market rates. Nor did the IFRIC believe that the repricing of itself would be representative of a change in the time pattern referred to in SIC-15.5. The IFRIC decided not undertake a project to modify SIC-15.

IAS 17: Time pattern of user's benefit from an operating lease

Issue: The IFRIC was asked to consider the income and expense recognition profile of an operating lease in which the annual payments rise by a fixed annual percentage over the life of the lease. The constituent asked whether it would be acceptable to recognise these increases in each accounting period when they are intended to compensate for expected annual inflation over the lease period.

Decision Not to Add: November 2005

Reason: The IFRIC noted that the accounting under IAS 17 for operating leases does not incorporate adjustments to reflect the time value of money, for example by deferring a portion of a level payment to a later period. Rather, IAS 17 requires a straight-line pattern of recognition of income or expense from an operating lease unless another systematic basis is more representative of the time pattern of the user's benefit. The IFRIC noted that recognising income or expense from annual fixed inflators as they arise would not be consistent with the time pattern of the user's benefit. Accordingly, the IFRIC decided not to take this item onto its agenda as it did not expect significant diversity in practice to arise. Note: In reaching the above decision, IFRIC members considered the comment letters received on the draft published in September Update but confirmed that these did not alter their view of the requirements of IAS 17.

IAS 17: Leases of land that do not transfer title to the lessee

Issue: IAS 17.14 states that a characteristic of land is that it normally has an indefinite economic life. If title is not expected to pass to the lessee by the end of the lease term, then the lessee normally does not receive substantially all of the risks and rewards incidental to ownership, in which case the lease is an operating lease. The IFRIC was asked whether long leases of land must be classified as an operating lease because, on a discounted present value basis, the lessee does receive substantially all of the risks and rewards, even though title does not transfer to the lessee.

Decision Not to Add: March 2006

Reason: The IFRIC noted that leases of land with an indefinite economic life, under which title is not expected to pass to the lessee by the end of the lease term, were always classified as operating leases before an amendment to IAS 17 was made in respect of IAS 40. Specifically, IAS 17 was amended to state that in leases of land that do not transfer title, lessees normally do not receive substantially all the risks and rewards incidental to ownership. Some have understood the introduction of the word 'normally' as implying that a long lease of land in which title would not transfer to the lessee would henceforth be treated as a finance lease, since the time value of money would reduce the residual value to a negligible amount. The IFRIC noted that, as summarised in paragraph BC 8, the Board considered but rejected that approach in relation to the classification of leases of land and buildings, because 'it would conflict with the criteria for lease classification in the Standard, which are based on the extent to which the risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee'. The Board also made clear that it had not made any fundamental changes to the Standard.

The IFRIC noted that one example of a lease classification affected by the introduction of the word 'normally' was a lease of land in which the lessor had agreed to pay the lessee the fair value of the property at the end of the lease period. In such circumstances, significant risks and rewards associated with the land at the end of the lease term would have been transferred to the lessee despite there being no transfer of title. Consequently a lease of land, irrespective of the lease term, is classified as an operating lease unless title is expected to pass to the lessee or significant risks and rewards associated with the land at the end of the lease term pass to the lessee.

The IFRIC decided not to add this item to its agenda as, although leases of land that do not transfer title are widespread, the IFRIC has not observed, and does not expect, significant diversity in practice to arise.

IAS 17: Recognition of contingent rentals

Issue: Whether an estimate of contingent rentals payable/receivable under an operating lease should be included in the total lease payments/lease income to be recognised on a straight-line basis over the lease term.

Decision Not to Add: July 2006

Reason: The IFRIC noted that, although the Standard is unclear on this issue, this has not, in general, led to contingent rentals being included in the amount to be recognised on a straight line basis over the lease term. Accordingly, the IFRIC decided not to add this issue to its agenda.

However, the IFRIC did agree:

• To send a recommendation to the IASB that at the next available opportunity IAS 17 should be clarified to state that contingent rentals should not be included in minimum lease payments for the purposes of income and expense recognition.
• In rejecting this topic, the IFRIC focused only on income and expense recognition ('straight-lining') and not on matters relating to lease classification.

IAS 17: Sale and leasebacks with repurchase agreements

Issue: Whether transactions that take the form of a sale and leaseback transaction should be accounted for as such when the seller/lessee retains effective control of the leased asset through a repurchase agreement or option.

Decision Not to Add: March 2007

Reason: IAS 17 applies only to transactions that convey a right to use an asset. SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and IFRIC 4 Determining whether an Arrangement contains a Lease provide guidance on when an arrangement conveys a right of use. If, applying the criteria in SIC-27 and IFRIC 4, an entity determines that an arrangement does not convey a right of use, the transaction is outside the scope of IAS 17 and the sale and leaseback accounting in IAS 17 should not be applied. Therefore, the IFRIC concluded that significantly divergent interpretations should not exist in practice.

IAS 17: Time pattern of the user's benefit

Issue: IAS 17.33 states: 'Lease payments under an operating lease shall be recognised as an expense on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the user's benefit.' The IFRIC was asked for guidance on what alternatives to straight-line recognition of lease expense might be appropriate.

Decision Not to Add: September 2008

Reason: The IFRIC felt that IAS 17 is clear that any departure from the straight-line recognition of lease expense under an operating lease must reflect the time pattern of the use of the leased asset, rather than the lessor's costs or benefit. The IFRIC did not expect significant diversity of practice to arise.

IAS 18: Extended payment terms

Issue: IFRIC members considered the accounting for extended payment terms, such as six-month's interest-free credit.

Decision Not to Add: July 2004

Reason: IFRIC members were of the opinion that the accounting treatment was clear, and declined to add the issue to its agenda. IFRIC members agreed that IAS 39 Financial Instruments: Recognition and Measurement applies to the receivable in such circumstances, and that the effect of the time value of money should be reflected when this is material (IAS 39 paragraphs AG69-AG82). IFRIC members noted that the wording of IAS 18 Revenue paragraph 11 lacked clarity and needed to be improved.

IAS 18: Prompt settlement discounts

Issue: How to account for prompt settlement discounts, and how to present them in the income statement?

Decision Not to Add: July 2004

Reason: IFRIC members agreed that prompt settlement discounts should be estimated at the time of sale, and presented as a reduction in revenues. IFRIC members agreed that it should not provide guidance on making such estimates, and declined to add the issue to the agenda.

IAS 18: Subscriber acquisition costs in the telecommunications industry

Issue: How should a provider of telecommunications services account for telephone handsets it provides free of charge or at a reduced price to customers who subscribe to service contracts:

• a. Should the contracts should be treated as comprising two separately identifiable components, that is, the sale of a telephone and the rendering of telecommunication services, as discussed in IAS 18.13, in which case revenue would be attributed to each component; or
• b. Should the telephones be treated as a cost of acquiring the new customer, with no revenue being attributed to them.

Decision Not to Add: March 2006

Reason: The IFRIC acknowledged that the question is of widespread relevance, both across the telecommunications industry and, more generally, in other sectors. IAS 18 does not give guidance on what it means by 'separately identifiable components' and practices diverge. However, the IFRIC noted that the terms of subscriber contracts vary widely. Any guidance on accounting for discounted handsets would need to be principles-based to accommodate the diverse range of contract terms that arise in practice. The IASB is at present developing principles for identifying separable components within revenue contracts. Therefore, the IFRIC decided not to add the topic to its agenda.

IAS 18: Guidance on identifying agency relationships

Issue: How should IAS 18.8 be applied when an entity employs another entity to meet the requirements of a customer under a sales contract?

Decision Not to Add: September 2007

Reason: The IFRIC acknowledged that while IAS 18 does not provide detailed guidance, IAS 18.8 does address the issue: 'In an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.' Paragraphs 6 and 18(d) of the Appendix to IAS 18 refer to the substance of the transaction to identify whether the entity is acting as agent or principal. The IFRIC concluded that:

• Determining whether an entity is acting as a principal or as an agent depends on facts and circumstances and that judgement is required;
• Any guidance beyond that given in IAS 18 would be more in the nature of implementation guidance than an Interpretation.

IAS 18 Revenue/IAS 39 Financial Instruments: Recognition and Measurement – Accounting for trailing commissions

Issue: How should an entity account for ongoing commission arrangements (known as 'trailing commissions') where the contractual obligation for the payment/receipt of the commission is not linked to the performance of any future service.

Decision Not to Add: September 2008

Reason: These kinds of arrangements exist in many industries, so the issue is widespread. Accounting practice in this area is diverse. The diversity arises, in part, because IAS 18 and IAS 39 have different recognition criteria and views differ on whether IAS 18 or IAS 39 is the relevant standard. Given the complexity of the issues and the pervasive effect of any conclusions reached, the IFRIC concluded that it would not be able to reach a consensus on a timely basis. Also, the Board was considering these issues in its projects on revenue recognition and liabilities.

IAS 18 Revenue – Receipt of a dividend of equity instruments

Issue: How should an entity recognise revenue from a dividend received in the form of the investee's own equity instruments.

Decision Not to Add: January 2010

Reason: The IFRIC noted an that paragraph 29(a) of IAS 18 addresses an analogous circumstance. In that case, the dividend is not recognised as revenue because it is not probable that there is an economic benefit associated with the transaction that will flow to the investor. The IFRIC concluded that any guidance it could provide on this issue would be in the form of application guidance. Consequently, the IFRIC decided not to add this issue to its agenda.

IAS 19: Calculation of discount rate

Issue: The IFRIC considered addressing how to determine the discount rate to be used in measuring a defined benefit liability under IAS 19 when there is no deep market in high quality corporate bonds, and the terms of government bonds are much shorter than the benefit obligations.

Decision Not to Add: February 2002

Reason: The IFRIC agreed to not take this issue onto its agenda because IAS 19 provides sufficient guidance.

IAS 19: Undiscounted vested employee benefits

Issue: 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).

Decision Not to Add: April 2002

Reason: 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.

IAS 19: Classification of an insured plan

Issue: The IFRIC considered whether to provide guidance relating to a particular insured 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.

Decision Not to Add: August 2002

Reason: 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.

IAS 19: Accounting for the transfer to the Japanese Government of the substitutional portion of employee pension fund liabilities

Issue: The issue is how an employer should account for the separation of the substitutional portion of the benefit obligation of employees' pension fund plans (which are defined benefit pension plans established under the Japanese Welfare Pension Insurance Law) from the corporate portion and the transfer of the substitutional portion and related assets to the Japanese government.

Decision Not to Add: April 2003

Reason: The IFRIC agreed that this issue did not have widespread and practical relevance in an IFRS context (ie the issue is too narrow to take onto the IFRIC's agenda). The IFRIC also noted that it was not aware of any interpretive questions that have arisen on this issue in practice.

IAS 19: Determining the appropriate rate to discount post-employment benefit obligations

Issue: The IFRIC considered the following question relating to paragraph 78 of IAS 19. If there is no deep market in high quality corporate bonds in a country, may the discount rate for a post-employment benefit obligation be determined by reference to a synthetically constructed equivalent instead of using the yield on government bonds? Paragraph 78 of IAS 19 states that:

"The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by reference to market yields at the balance sheet date on high quality corporate bonds. In countries where there is no deep market in such bonds, the market yields (at the balance sheet date) on government bonds shall be used."

Decision Not to Add: June 2005

Reason: The IFRIC took the view that paragraph 78 is clear that a synthetically constructed equivalent to a high quality corporate bond by reference to the bond market in another country may not be used to determine the discount rate. The IFRIC observed that the reference to 'in a country' could reasonably be read as including high quality corporate bonds that are available in a regional market to which the entity has access, provided that the currency of the regional market and the country were the same (for example, the euro). This would not apply if the country currency differed from that of the regional market.

IAS 19: Special wages tax

Issue: Whether taxes related to defined benefits, for example taxes payable on contributions to a defined benefit plan or taxes payable on some other measure of the defined benefit, should be treated as part of the defined benefit obligation in accordance with IAS 19.

Decision Not to Add: March 2007

Reason: The IFRIC noted that taxes paid by a defined benefit plan are included in the definition in IAS 19 of the return on plan assets. Also, income taxes paid by the entity are accounted for in accordance with IAS 12. The scope of IAS 19 is not restricted to benefits paid to employees. It includes some costs of employee benefits that are not paid to employees. A wide variety of taxes on pension costs could exist worldwide, each specific to its own jurisdiction, and it is a matter of judgement whether they are income taxes within the scope of IAS 12, costs of employee benefits within the scope of IAS 19, or other costs within the scope of IAS 37. Given the variety of tax arrangements, the IFRIC believed that guidance could not be developed in a reasonable period of time.

IAS 19: Distinguishing between curtailments and negative past service costs

Issue: Should plan amendments that reduce benefits be accounted for as curtailments or as negative past service costs?

Decision Not to Add: May 2007

Reason: The IFRIC noted that the Basis for Conclusions on IAS 19 indicates that IASC was aware of the ambiguity in distinguishing between negative past service costs and curtailments, but decided that the issue arose too rarely to justify the complexity that a more detailed requirement would produce. Since, recently, the issue is becoming more prevalent and divergent practices are developing, the IFRIC believed that the issue should be addressed. However, the IFRIC noted the IASB is currently engaged in a post-employment benefits project. The IFRIC therefore decided not to take the issue onto its agenda, but to refer it to the Board for consideration.

IAS 19: Benefit allocation for defined benefit plans

Issue: How should an entity attribute the benefit in a defined benefit plan to individual periods of service?

Decision Not to Add: September 2007

Reason: The IFRIC noted that while the Board is not addressing benefit allocation in phase 1 of its project on post-employment benefits, nonetheless it would be difficult to address this issue while the Board had an ongoing project on defined benefit plans. The IFRIC decided to remove this issue from its agenda.

IAS 19: Change to a defined benefit plan resulting from action by a government

Issue: How to account for the effects of a change to a defined benefit plan resulting from action by a government.

Decision Not to Add: November 2007

Reason: The IFRIC noted that IAS 19 paragraph BC55 already provides guidance on that the identity of the originator of the change should not affect the accounting. That paragraph 55 indicates that the IASC did not believe that the source of the change (decision by an outside party such as the government versus a decision by plan trustees) should affect the accounting.

IAS 19: Treatment of employee contributions

Issue: Two issues relating to treatment of employee contributions:

• How employee contributions should be accounted for in general.
• How to account for a pension plan in which the cost of providing the benefits is shared between the employees and the employer.

Decision Not to Add: November 2007

Reason:

• On the first issue, paragraph 120A of IAS 19 implies that contributions by employees to the ongoing cost of the plan reduce the current service cost to the entity. Also, IAS 19.9 requires that employee contributions payable when benefits are paid, such as contributions to a post-employment healthcare plan, are to be taken into account in determining the defined benefit obligation.
• On the second issue, the IFRIC noted that paragraph 85 of IAS 19 states that 'If the formal terms of a plan (or a constructive obligation that goes beyond those terms) require an entity to change benefits in future periods, the measurement of the obligation reflects those changes.' Therefore, the IFRIC noted that:
  • if the terms of a defined benefit plan include surplus-sharing provisions, the employer's obligation to use any surplus in the plan for the benefit of plan participants (eg adjusting participants' benefits) should be considered when measuring its obligation.
  • if the terms of a defined benefit plan include cost-sharing provisions, the requirement for employees to make contributions to reduce or eliminate an existing deficit should be considered when measuring the employer's obligation.

IAS 19: Death in service benefits

Issue: Death in service benefits are payments made by an entity to its employees if they die while employed. The issue is how death in service benefits should be attributed to periods of service under IAS 19.

Decision Not to Add: January 2008

Reason: The IFRIC noted that paragraph 67(b) of IAS 19 requires attribution of the cost of the benefits until the date 'when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases.' In the case of death in service benefits, the IFRIC noted that:

• the anticipated date of death would be the date at which no material amount of further benefit would arise from the plan;
• using different mortality assumptions for a defined benefit pension plan and an associated death in service benefit would not comply with the requirement in paragraph 72 of IAS 19 to use actuarial assumptions that are mutually compatible; and
• if the conditions in paragraph 39 of IAS 19 were met then accounting for death in service benefits on a defined contribution basis would be appropriate.

IAS 19: Definition of plan assets

Issue: If an investment or insurance policy is issued by an entity to a pension plan covering its own employees (or the employees of its cnsolidated group), are such policies part of plan assets in the consolidated and separate financial statements of the sponsor?

Decision Not to Add: January 2008

Reason: The IFRIC noted that, if a policy was issued by a group company to the employee benefit fund then the treatment would depend upon whether the policy was a 'non-transferable financial instrument issued by the reporting entity'. Since the policy was issued by a related party, it could not meet the definition of a qualifying insurance policy. The IFRIC considered that the issue was too narrow in scope to develop an Interpretation and decided not to add the issue to its agenda.

IAS 19: Pension promises based on performance hurdles

Issue: How is the defined benefit obligation measured when pension promises are based on achieving specific performance targets? Such performance hurdles may range from additional pensionable earnings if performance targets are met to more complex arrangements that provide for additional sponsor contributions or years of deemed service.

Decision Not to Add: January 2008

Reason: The IFRIC noted that paragraph 73 of IAS 19 states that 'Actuarial assumptions are an entity's best estimates of the variables that will determine the ultimate cost of providing post-employment benefits.' Performance targets are variables that will affect the ultimate cost of providing the post-employment benefits. They should therefore be included in the determination of the benefit. Further, when benefits are affected by performance hurdles, the effect on the attribution of benefits must also be considered. Given the requirements in IAS 19, the IFRIC did not expect divergence in practice and decided not to add the issue to its agenda.

IAS 19: Employee benefits - settlements

Issue: If a defined benefit plan gives plan members the option to choose to receive a lump sum payment at retirement instead of ongoing payments, is the lump sum payment a settlement as defined in IAS 19?

Decision Not to Add: May 2008

Reason: Events that are covered by the actuarial assumptions underlying the measurement of the defined benefit obligation are not treated as settlements under IAS 19. The IFRIC decided not to add the issue to its agenda because there was little diversity in practice.

IAS 21: Exchange Rate for remeasuring foreign currency transactions and translation of foreign operations

Issue: The issue is which exchange rate an entity should use for remeasuring foreign currency transactions and translation of foreign operations if more than one exchange rate is available.

Decision Not to Add: April 2003

Reason: The IFRIC noted that paragraph 24 of IAS 21 (in the Exposure Draft of proposed Improvements to International Accounting Standards) states that "When several exchange rates are available, the rate to be used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date." The IFRIC agreed that the guidance in the improved IAS 21 is satisfactory and decided not to take the issue on to its agenda.

IAS 21: Determination of functional currency of an investment holding company

Issue: Should the underlying economic environment of subsidiaries should be considered in determining the functional currency of an investment holding company in holding company's separate financial statements?

Decision Not to Add: March 2010

Reason: Paragraph 12 of IAS 21 states that when the 'indicators are mixed and the functional currency is not obvious, management uses its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions'. How an entity applies IAS 21 for the purpose of determining its functional currency – whether it is an investment holding company or any other type of entity – requires the exercise of judgement. The IFRIC concluded not to add the issue to its agenda because any guidance it could provide would be in the nature of application guidance rather than an interpretation.

IAS 23: (revised in 2007) Foreign exchange and capitalisable borrowing costs

Issue: IAS 23 states that 'Borrowing costs may include …exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs'. The issue is which foreign exchange gains and losses may be regarded as adjustments to interest costs for the purpose of applying IAS 23? Also, what isw the treatment of any derivatives used to hedge such foreign exchange exposures.

Decision Not to Add: January 2008

Reason: The IFRIC noted that the principle set out in paragraph 8 of IAS 23 states 'an entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.' The IFRIC also noted that paragraph 11 states 'the determination of the amount of borrowing costs that are directly attributable to the acquisition of a qualifying asset is difficult and the exercise of judgement is required.' Consequently, how an entity applies IAS 23 to foreign currency borrowings is a matter of accounting policy requiring the exercise of judgement. The IFRIC also noted that, as part of its project to amend IAS 23, the Board specifically considered this issue and decided not to develop further guidance in this area. The IFRIC concluded that it should not develop guidance as the Board had already decided not to provide it. The IFRIC therefore decided not to add the issue to its agenda.

IAS 23: Meaning of 'general borrowings'

Issue: Which borrowing costs should be included in 'general borrowings' pursuant to IAS 23.14? In particular, should general borrowings include a borrowing to purchase a specific asset other than an asset that qualifies for borrowing cost capitalisation under IAS 23?

Decision Not to Add: November 2009

Reason: During discussion of the annual improvements project at its July 2009 meeting, the IASB noted that IAS 23 excludes only debt used to acquire qualifying assets from the determination of general borrowings capitalisation rate. Therefore, IFRIC decided not to add this topic to its agenda.

IAS 24: Identifying and disclosing related party transactions by state-owned business entities

Issue: The issue concerns the practical difficulty for some entities, especially government business entities, in identifying and disclosing related party transactions.

Decision Not to Add: May 2004

Reason: The IFRIC agreed that the issue was one of detailed application, rather than principle, and that there was little scope for the IFRIC to issue a useful Interpretation consistent with IAS 24. Accordingly, the IFRIC declined to add the topic to its agenda.

IAS 24: Disclosure of emoluments to key management personnel

Issue: Paragraph IN5 of IAS 24 (as revised in 2003) states that a main change in IAS 24 (2003) from the previous version (1994) was that "The Standard requires disclosure of the compensation of key management personal". The IFRIC was asked to consider whether, based on this introductory remark, it was possible to infer that IAS 24 (1994) did not require disclosure of compensation of key management personnel.

Decision Not to Add: September 2004

Reason: The IFRIC noted that the comments in the Introduction of IAS 24 (2003) were made to highlight explicitly that disclosure of key management personnel was required, given that the 2002 Exposure Draft had proposed eliminating this disclosure. This was not a change from the requirements of IAS 24 (1994). IAS 24 (1994) had no specific exemption for the disclosure on management compensation. Accordingly, IAS 24 (1994) required an entity to disclose key management personnel compensation, given they met the definition of a related party. No interpretation was considered necessary.

IAS 24: Interpretation of the term 'information' in IAS 24 paragraph 17

Issue: The IFRIC was asked to supplement the minimum disclosures in paragraph 17 regarding "transactions and outstanding balances necessary for an understanding of the potential effect of [related party] relationships on the financial statements". For example, it was suggested that an interpretation of paragraph 17 should specifically require disclosure of the purpose and economic substance of transactions, identity of related parties, extend of management involvement, special risks and the effect of such transactions on the financial statements.

Decision Not to Add: September 2004

Reason: The IFRIC agreed not to add this issue to its agenda, noting that the IASB, in its revisions to IAS 24 in 2003, debated the extent of specific minimum disclosure requirements and the suggested items were not included. The IFRIC did agree that, because of wider policy considerations, this issue might be appropriate for discussion at the Board and, perhaps, the Standards Advisory Council.

IAS 26: Conflict between scope and definitions of IAS 26

Issue: The Committee considered a potential issue related to an apparent conflict within IAS 26. The organisation referring the issue to the IFRIC noted that it was apparent that IAS 26 was intended to address all types of retirement benefit plans and the scope of the Standard is sufficiently generic for it to be applied to plans other than those sponsored by employers. Indeed, IAS 26 paragraph 9 states: "Some retirement benefit plans have sponsors other than employers; this Standard also applies to the reports of such plans."

However, IAS 26 paragraph 8 defines 'Retirement benefit plans' as: "arrangements whereby an enterprise provides benefits for its employees on or after termination of service".

Decision Not to Add: March 2004

Reason: The IFRIC agreed that the wording of IAS 26 could be improved, but noted that the intention of the Standard (as expressed in paragraph 9) was clear. On balance, the IFRIC did not think that this was a priority issue, and suggested that the issue be addressed via editorial corrections to IAS 26 at an appropriate time.

IAS 27: The effects of rights of veto on control

Issue: 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.

Decision Not to Add: August 2002

Reason: 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.

IAS 27: Possible amendment to SIC-12

Issue: 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.

Decision Not to Add: November 2002

Reason:

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, 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.
• 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 2002 meeting.

An Exposure Draft on Consolidation (including Special Purpose Entities) is expected to be issued in the 4th quarter of 2004.

IAS 27: Reciprocal interests

Issue: 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.
• (b) When a control relationship exists, and holdings are accounted for under IAS 27.

Decision Not to Add: April 2003

Reason: 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.

IAS 27: Separate financial statements issued before consolidated financial statements

Issue: Whether separate financial statements issued before consolidated financial statements could be considered to comply with IFRSs.

Decision Not to Add: March 2006

Reason: IAS 27 requires that separate financial statements must identify the financial statements prepared in accordance with paragraph 9 of IAS 27 to which they relate (the consolidated financial statements), unless the exemption provided by paragraph 10 is applicable. The IFRIC decided that, since the Standard is clear, it would not expect diversity in practice and would not take this item onto its agenda.

IAS 27: Transaction costs for non-controlling interest

Issue: How to account for transaction costs incurred in the acquisition or disposal of non-controlling interest (NCI) that does not result in the loss of control of an entity?

Decision Not to Add: July 2009

Reason: IAS 27 provides that transactions with owners are not part of the income and expense generated by the entity's activities during that period. Becuase IAS 27 is clear, the IFRIC decided not to add the issue to its agenda.

IAS 27: Combined financial statements and redefining the reporting entity

Issue: May an entity present IFRS financial statements that include a selection of entities that are under common control, rather than being restricted to a parent/subsidiary relationship as defined by IAS 27.

Decision Not to Add: January 2010

Reason: The IFRIC decided not to add this project to its agenda because the Board has two projects on its agenda that relate to this issue: A project on common control transactions and Phase D Reporting Entity of the Board's Conceptual Framework project.

IAS 27: Presentation of comparatives when applying the 'pooling of interests' method/B>

Issue: How shouild comparative financial statements be presented when applying the 'pooling of interests' method for business combinations between entities under common control when preparing financial statements in accordance with IFRSs.

Decision Not to Add: January 2010

Reason: The IFRIC decided not to add this project to its agenda because the Board has a project on its agenda to examine the definition of common control and the methods of accounting for business combinations under common control in the acquirer's consolidated and separate financial statements.

IAS 28: Equity method application

Issue: The IFRIC considered various examples that raise the issue of whether the presumption in the Exposure Draft to improve IAS 28 that an investor has 'significant influence' over the operations of an investee if it holds directly or indirectly through subsidiaries, 20 per cent or more of the voting power of the investee is met. The examples fell into two main categories:

• (a) When the investor has a subsidiary that is less than wholly-owned, and the subsidiary holds 20 per cent of the voting power of the investee; and
• (b) When the investor holds 20 per cent or more of the voting power of the investee through associates or joint ventures (rather than subsidiaries).

Decision Not to Add: April 2003

Reason: The IFRIC agreed that in the examples that fell under:

• (a) - the presumption was met.
• (b) - in one case, the conclusion that equity accounting would be applied was based on the mechanics of equity accounting rather than using the 20 per cent presumption, and in another case, it was unclear as to whether the presumption was met.

The IFRIC agreed to pass this issue to the Improvements project to clarify the wording in IAS 28. Paragraph 6 of the revised IAS 28 was revised to address this issue (paragraph 4 of the exposure draft).

IAS 28: Investments after discontinuing equity accounting

Issue: 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.

Decision Not to Add: February 2002

Reason: 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.

IAS 28: Potential effect of revised IFRS 3 and IAS 27 on the equity method

Issue: The IASB and FASB completed a joint project on business combinations. As a result of that project, FASB's equivalent of IFRIC (the EITF) is addressing the following issues relating to the equity method arising from the new business combinations standard:

• how to assess impairment of an underlying indefinite-lived intabgible asset of an equity method investment, and
• how to account for a change from the equity method to the cost method.

Decision Not to Add: March 2009

Reason: The IFRIC concluded that IAS 28 provides explicit guidance on both of the above issues and, therefore, divergence in practice is not expected under IFRSs.

IAS 28: Potential effect of revised IFRS 3 and IAS 27 on equity method accounting

Issue: The IASB and FASB completed a joint project on business combinations. As a result of that project, FASB's equivalent of IFRIC (the EITF) is addressing the following issues relating to the equity method arising from the new business combinations standard:

• How the initial carrying amount of an equity method investment should be determined, and
• How an equity method investee's issue of shares should be accounted for.

Decision Not to Add: July 2009

Reason: Regarding the first question, IFRIC felt that paragraph 11 of IAS 28 is clear that the cost of an investment in an associate at initial recognition comprises its purchase price and any directly attributable expenditures necessary to obtain it. Regarding the second question, IFRIC concluded that paragraph 19A of IAS 28 provides sufficient guidance. Therefore IFRIC decided not to add the item to its agenda.

IAS 28: Venture capital consolidations and partial use of fair value through profit or loss

Issue: A consolidated group has an investment in an associate, one part of which is held by a subsidiary that is a financial fund applying IAS 39 and the other part is held by another subsidiary that uses the equity method. Can both measurement bases be used in the consolidated financial statements?

Decision Not to Add: July 2009

Reason: The IFRIC noted that significant diversity exists in practice on this issue because of the apparently conflicting guidance within IAS 28 and between IAS 28 and other standards. Consequently, the IFRIC decided that it could be best resolved by referring it to the IASB. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 28: Impairment of investments in associates

Issue: How should impairment of investments in associates be determined in the separate financial statements of the investor?

Decision Not to Add: July 2009

Reason: The IFRIC concluded that it is not clear whether in its separate financial statements an investor should determine impairment in accordance with IAS 36 or IAS 39. In view of the existing guidance in IFRSs, the IFRIC concluded that significant diversity is likely to exist in practice on this issue. The IFRIC decided that it could be best resolved by referring it to the IASB. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 29: Hyperinflation - various issues

Issue: Accounting for inflation is dealt with in IAS 15 Information Reflecting the Effects of Changing Prices [withdrawn December 2003] and IAS 29. 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.

Decision Not to Add: November 2002

Reason: 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.

IAS 32: Discretionary distributions and economic compulsion

Issue: 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.

Decision Not to Add: February 2002

Reason: 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.

IAS 32: Own shares that are held for trading purposes

Issue: 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 to allow them to be measured at fair value with changes in value being reported in the income statement.

Decision Not to Add: August 2002

Reason: 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.

IAS 32: Classification of non-redeemable preference shares

Issue: The issue was whether a plain vanilla non-redeemable preference share should be classified as a liability or equity.

Decision Not to Add: May 2004

Reason: The IFRIC agreed that there was sufficient application guidance on this issue in IAS 32/39, and recommended that the issue not be added to the IFRIC agenda.

IAS 32: Employee long service leave

Issue: The IFRIC considered whether a liability for long service leave falls within IAS 19 or whether it is a financial liability within the scope of IAS 32.

Decision Not to Add: November 2005

Reason: The IFRIC noted that IAS 19 indicates that employee benefit plans include a wide range of formal and informal arrangements. It is therefore clear that the exclusion of employee benefit plans from IAS 32 includes all employee benefits covered by IAS 19. The IFRIC decided that, since the Standard is clear, it would not expect diversity in practice and would not take this item onto its agenda.

IAS 32: Changes in the contractual terms of an existing equity instrument resulting in it being reclassified to financial liability

Issue: The IFRIC was asked to consider a situation in which an amendment to the contractual terms of an equity instrument resulted in the instrument being classified as a financial liability of the issuer. Two issues were discussed:

• 1. On what basis should the financial liability be measured at the date when the terms were changed?
• 2. How should any difference between the carrying amount of the previously recognised equity instrument and the amount of the financial liability recognised at the date when the terms were changed be accounted for?

Decision Not to Add: November 2006

Reason: The IFRIC noted that at the time when the contractual terms are changed, a financial liability is initially recognised, and, furthermore, that a financial liability on initial recognition is measured at its fair value in accordance with IAS 39. Further, a change in the terms of the instrument gives rise to derecognition of the original equity instrument. The IFRIC therefore believed that, at the time when the terms were changed, the difference between the carrying amount of the equity instrument and the fair value of the newly recognised financial liability should be recognised in equity. Since the accounting literature seems clear, an Interpretation is not needed.

IAS 32: Classification of a financial instrument as liability or equity

Issue: What is the role of contractual obligations and economic compulsion in the classification of financial instruments?

Decision Not to Add: November 2006

Reason: The IFRIC noted that the Board discussed this issue in June 2006. IASB Update for June 2006 reported that:

The Board confirmed that such a contractual obligation could be established explicitly or indirectly, but it must be established through the terms and conditions of the instrument. Thus, by itself, economic compulsion would not result in a financial instrument being classified as a liability under IAS 32. The Board also stressed that IAS 32 requires an assessment of the substance of the contractual arrangement. It does not, however, require or permit factors not within the contractual arrangement to be taken into consideration in classifying a financial instrument.

The IFRIC concluded that the Board's statement in IASB Update provides sufficient guidance.

IAS 32: Foreign currency instruments exchangeable into equity instruments of the parent entity of the issuer

Issue: The IFRIC was asked to consider whether the issue by a subsidiary of derivative financial instruments (conversion options) that provide holders with the rights to exchange the financial instruments into a fixed number of equity instruments of the parent at a fixed amount of foreign currency are classified as (a) financial liabilities or (b) equity in the consolidated financial statements of the parent.

Decision Not to Add: November 2006

Reason: The IFRIC believed that the question is sufficiently narrow that it is not expected to have widespread relevance in practice. The IFRIC, therefore, decided not to take the matter onto its agenda.

IAS 32: Puts and forwards held by minority interests

Issue: What is the appropriate accounting when a parent entity has entered into a forward to acquire the shares held by the [non-controlling] minority interest in a subsidiary or the holder of the [non-controlling] minority interest can put its shares to the parent entity?

Decision Not to Add: November 2006

Reason: Paragraph 23 of IAS 32 states that a parent must recognise a financial liability when it has an obligation to pay cash in the future to purchase the minority's shares. The parent will reclassify the liability to equity if a put expires unexercised. The IFRIC agreed that there is likely to be divergence in practice in how the related equity is classified. However, the IFRIC did not believe that it could reach a consensus on this matter on a timely basis. Accordingly, the IFRIC decided not to add this item to its agenda.

IAS 32: Transaction costs to be deducted from equity

Issue: What is the meaning of the terms 'incremental' and 'directly attributable' for the purpose of (a) determining which transaction costs should be accounted for as a deduction from equity in accordance with IAS 32.37 and (b) allocating transaction costs that relate jointly to two or more transactions?

Decision Not to Add: September 2008

Reason: The IFRIC concluded that the two terms are used with similar but not identical meanings in many Standards and Interpretations. The IFRIC recommended that common definitions should be developed for both terms and added to the Glossary as part of the Board's annual improvements project, rather than defined by interpretation in the narrow context of IAS 32.

IAS 32: Classification of puttable and perpetual instruments

Issue: How should an entity's puttable instruments that are subordinate to all other clases of instruments be classified (liability or equity) when the entity also has perpetual instruments that are classified as equity?

Decision Not to Add: March 2009

Reason: The IFRIC concluded that IAS 32 is clear that it does not preclude several classes of equity. So the existence of a perpetual equity instrument would not affect the classification a puttable instrument. Because divergence is not expected to develop in practice, the IFRIC decided not to add the issue to its agenda.

IAS 32: Scope Issue for REITs (also IFRS 4)

Issue: In some jurisdictions, for a Real Estate Investment Trust (REIT) to obtain preferential tax treatment, it must distribute a minimum percentage of its income to investors. The remaining income may be distributed at the discretion of management. The issue is whether the discretion to distribute the remaining REIT income meets the definition of a Discretionary Participation Feature (DPF) as defined in IFRS 4. If the DPF definition is met, IFRS 4 permits the ownership units to be classified as a liability, rather than assessing the instrument for financial liability and equity components in accordance with IAS 32.

Decision Not to Add: January 2010

Reason: The IFRIC noted that the definition of DPF in Appendix A of IFRS 4 requires, among other things, that the instrument provides the holder with guaranteed benefits and that the DPF benefits are additional to those guaranteed benefits. Furthermore, the IFRIC noted that there must be guaranteed benefits to the holder for the definition to be met and that such guaranteed benefits are typically those present in insurance activities. The IFRIC concluded that providing guidance on this issue would be in the nature of application guidance, rather than interpretative guidance. Consequently, the IFRIC decided not to add the issue to its agenda.

IAS 32: Application of the 'fixed for fixed' condition

Issue: Paragraph 22 of IAS 32 states that 'except as stated in paragraph 22A, a contract that will be settled by the entity (receiving or) delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or another financial asset is an equity instrument' (often referred to as the 'fixed-for-fixed' condition). The IFRIC was asked for guidance on applying this paragraph to situations other than those expressly addressed in paragraph 22.

Decision Not to Add: January 2010

Reason: The IFRIC decided not to add the issue to its agenda because the Board's current project on Financial Instruments with Characteristics of Equity is expected to address issues relating to the fixed-for-fixed condition on a timely basis.

IAS 32: Shareholder discretion

Issue: If the holder of a preference share has the choice of receiving cash or another equity instrument, is that preference share a financial liability or equity?

Decision Not to Add: March 2010

Reason: The IFRIC acknowledged that diversity exists in practice. Since the IASB is currently working on a project on financial instruments with the characteristics of equity, IFRIC recommended that the Board address this issue as part of that, rather than IFRIC adding the issue to its own agenda.

IAS 34: Interim disclosures about fair value

Issue: Are updates to annual fair value disclosures required in condensed interim financial reports?

Decision Not to Add: July 2009

Reason: IAS 34 is clear that if there is a signficant event since the last annual report, disclosure is required. Therefore, IAS 34 provides sufficient guidance to enable entities to decide whether updates to fair value disclosures are required in interim financial reports. IFRIC decided not to add the issue to its agenda.

IAS 36: The inclusion/exclusion from value in use of cash flows expected to arise from a future restructuring

Issue: The IFRIC considered two issues focused on IAS 36 paragraph 37, which requires the cash flows used in the value in use calculation not to include cash flows that are expected to arise from (a) a future restructuring to which an enterprise is not yet committed; or (b) future capital expenditure that will improve or enhance the asset in excess of its standard of performance assessed immediately before the expenditure is made.

Decision Not to Add: February 2003

Reason: The IFRIC noted that it was likely that resolution of these issues would require an amendment to IAS 36. Also the IASB is already amending IAS 36 as part of its project on business combinations. For these reasons, the IFRIC agreed that these issues would be better addressed directly by the Board rather than by the IFRIC.

The Board considered this issue at the November 2003 meeting, making a minor amendment to the IAS 36 paragraph 27(b) as a result of the discussion. These issue are clarified at length in paragraphs BC68-BC75 of the Basis of Conclusions of IAS 36.

IAS 36: Impairment of undeveloped reserves by entities engaged in extractive activities

Issue: The IFRIC considered a potential issue as to whether the recoverable amount of a cash-generating unit of an entity with extractive activities (typically a site) for which production has commenced should include the expected cash inflows from, and cash outflows necessarily incurred in, developing the site further in order to access undeveloped reserves over the life of the site.

Decision Not to Add: May 2004

Reason: The IFRIC decided not to add this issue to its agenda, but requested it be considered by the Board during its redeliberation of ED 6 Exploration for and Evaluation of Mineral resources.

IAS 36: Identifying Cash-generating Units in the Retail Industry

Issue: Whether a cash-generating unit (CGU) can combine more than one individual store location, for example, based on shared infrastructures, marketing and pricing policies, and human resources.

Decision Not to Add: March 2007

Reason: IAS 36.6 requires identification of CGUs on the basis of independent cash inflows rather than independent net cash flows. Therefore, outflows such as shared infrastructure and marketing costs are not considered. The IFRIC determined that additional guidance is not needed.

IAS 36: Interaction with transition requirements of IFRS 8

Issue: How should the transition requirements in IFRS 8 Operating Segments interact with IAS 36? Specifically, should any incremental goodwill impairment loss (that would have been recognised in a prior period if cash-generating units had been grouped by reference to IFRS 8) determined as a result of retrospective application of the change from IAS 14 to IFRS 8 be presented as a prior period adjustment or a current period event?

Decision Not to Add: March 2010

Reason: Because IFRS 8 is effective for annual periods ending 31 December 2009 and thereafter, IFRIC concluded it would not be able to provide guidance on a timely basis. Therefore, the IFRIC decided not to add the issue to its agenda.

IAS 37: Onerous contracts

Issue: 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.

Decision Not to Add: February 2002

Reason: The IFRIC decided not to add this issue onto its agenda because IAS 37 and IAS 36 provide sufficient guidance.

IAS 37: Provisions - examples of constructive obligations

Issue: The IFRIC considered addressing examples of when constructive obligations exist under IAS 37.

Decision Not to Add: February 2002

Reason: The IFRIC decided not to add this issue onto its agenda because IAS 37 provides sufficient guidance.

IAS 37: Onerous contracts – operating leases and other executory contracts

Issue: The IFRIC considered whether it should take onto its agenda the issue of interpreting the requirements of IAS 37 relating to onerous contracts. The IFRIC discussed the scope of this issue, the underlying rationale for recognising such a provision and how the provision should be measured.

Decision Not to Add: December 2003

Reason: The IFRIC agreed that this issue should not be taken on as its agenda, but agreed that the points raised in its discussion should be brought to the Board's attention, including the interaction with the revision of IAS 37 in the convergence project. Given the limited scope of the IAS 37 convergence project, the Board decided that it should not make fundamental changes to the requirements for onerous contracts. It also noted that it had two projects on its active agenda (Leasing and Revenue Recognition) that could affect these requirements. Nonetheless, the Board is considering additional guidance to the existing requirements to make it clear that if a contract becomes onerous as a result of an entity's own actions, no provision is recognised until that action occurs. The IASB/FASB joint convergence project on IAS 37 is expected to result in an Exposure Draft being issued by the IASB in the 2nd quarter of 2004.

IAS 37: Obligations to repair/maintain another entity's property, plant and equipment

Issue: The IFRIC considered a suggestion made during its project on service concessions that it should take onto its agenda a separate project to interpret the requirements of IAS 37 in respect of obligations to repair or maintain another entity's property, plant and equipment that the reporting entity uses.

Decision Not to Add: August 2005

Reason: The IFRIC decided not to add this topic to its agenda because, in practice, entities are recognising a provision for repairs as damage or usage occurs that the entity is obliged to make good. The IFRIC was not aware of evidence that significantly divergent interpretations were being reached in practice.

IAS 37: Deposits on returnable containers

Issue: In some industries, entities that distribute their products in returnable containers collect a deposit for each container delivered and have an obligation to refund this deposit when containers are returned by the customer. Should the obligation be accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement?

Decision Not to Add: May 2008

Reason: The IFRIC reasoned that that obligation is an exchange transaction of cash (the deposit) for the containers (non-financial assets). Whether that exchange transaction occurs is at the option of the customer. Because the transaction involves the exchange of a non-financial item, it does not meet the definition of a financial instrument in accordance with IAS 32 and therefore is not within the scope of IAS 39. The IFRIC concluded that divergence in this area was unlikely to be significant and therefore decided not to add this issue to its agenda.

IAS 37: Regulatory assets and liabilities (Also relates to IAS 38)

Issue: Is it appropriate for a rate-regulated entity to recognise a liabuility (or an asset) that arises as a result of rate regulation by regulatory bodies or governments?

Decision Not to Add: March 2009

Reason: In December 2008, the IASB added to its agenda an accelerated project on Rate-regulated Activities. The IFRIC decided, therefore, not to add this issue to its agenda.

IAS 38: Costs of acquiring or developing content for electronic databases

Issue: The IFRIC considered addressing the following:

• How to account for the costs of acquiring or generating information to be included in an electronic database
• 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
• If the costs in (a) should be capitalised, how to account for the costs of maintaining and enhancing the collection.

Decision Not to Add: February 2002

Reason: The IFRIC decided to not address these issues because SIC-32 Intangible Assets - Web Site Costs, and IAS 38 Intangible Assets provides sufficient guidance.

IAS 38: Subscription acquisition costs

Issue: The IFRIC considered a question on the application of IAS 38 that had been referred to it by the Urgent Issues Group of the Australian Accounting Standards Board. The UIG was concerned that its Abstract 42 Subscriber Acquisition Costs in the Telecommunications Industry might be inconsistent with IFRSs.

Decision Not to Add: November 2004

Reason: IFRIC members expressed concern that the issues raised in UIG 42 applied in a broad range of situations and were not limited to the telecommunications sector. If the IFRIC did add this topic to its agenda, there were concerns about whether IFRIC would be able to reach a consensus view on a timely basis. The IFRIC also noted that this issue was related to several Board projects. Accordingly, the IFRIC tentatively agreed not to add this issue to its agenda.

IAS 38: Regulatory asset

Issue: The IFRIC considered a request for guidance for operations subject to price regulation. The request concerned situations in which a regulatory agreement allowed the entity to increase its prices in future years to recover outflows of economic resources during the current or previous years. The IFRIC was asked whether US SFAS 71 Accounting for the Effects of Certain Types of Regulation could be applied under the hierarchy in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors for selection of an accounting policy in the absence of specific guidance in IFRSs.

Decision Not to Add: August 2005

Reason: The IFRIC observed that it had previously discussed whether a regulatory asset should be recognised in the context of service concession arrangements, either as deferred costs or as an intangible asset to reflect an expectation that the entity will recover these costs as part of the price charged in future periods. It had concluded that entities applying IFRSs should recognise only assets that qualified for recognition in accordance with the IASB's Framework for the Preparation and Presentation of Financial Statements and relevant accounting standards, such as IAS 11 Construction Contracts, IAS 18 Revenue, IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets. The IFRIC had noted that SFAS 71 required entities to recognise regulatory assets when certain conditions were met. However, the IFRIC had concluded that the recognition criteria in SFAS 71 were not fully consistent with recognition criteria in IFRSs, and would require the recognition of assets under certain circumstances which would not meet the recognition criteria of relevant IFRSs. Thus the requirements of SFAS 71 were not indicative of the requirements of IFRSs.

Since it already had concluded that the special regulatory asset model of SFAS 71 could not be used without modification, the IFRIC noted that expenses incurred in performing price-regulated activities should be recognised in accordance with applicable IFRSs and decided not to add a project on regulatory assets to its agenda.

IAS 38: Classification and accounting for SIM cards

Issue: Should a mobile phone operator account for a Subscriber Identity Module (or '[SIM card') as an intangible asset in accordance with IAS 38 or as inventory in accordance with IAS 2?

Decision Not to Add: November 2006

Reason: The IFRIC declined to take the issue onto its agenda because (a) the issue is not widespread and (b) it is similar to another issue that it declined to put on its agenda (IAS 18 - which costs incurred by a mobile phone operator entering into a contract with a customer qualify for recognition as subscriber acquisition costs - March 2006).

Adoption of IAS 38 (revised 2004)

Issue: Should the December 2003 consequential amendments to IAS 38 be applied retrospectively or prospectively if an entity adopted the March 2004 version of IAS 38 early.

Decision Not to Add: November 2006

Reason: The IFRIC agreed that although divergence might have arisen in the way that the two sets of amendments to IAS 38 were adopted in 2004, the issue is not widespread and that further diversity is unlikely to develop in the future. The IFRIC therefore decided not to take the issue onto its agenda.

IAS 38: Regulatory assets and liabilities (Also relates to IAS 37)

Issue: Is it appropriate for a rate-regulated entity to recognise a liabuility (or an asset) that arises as a result of rate regulation by regulatory bodies or governments?

Decision Not to Add: March 2009

Reason: In December 2008, the IASB added to its agenda an accelerated project on Rate-regulated Activities. The IFRIC decided, therefore, not to add this issue to its agenda.

IAS 38: Accounting by a real estate developer for sales costs during construction

Issue: Is it appropriate for a real estate developer to capitalise sales and marketing costs during construction as part of the cost of an asset?

Decision Not to Add: May 2009

Reason: Accounting for selling costs is addressed in a number of IFRSs. Some standards prohibit capitalisation in specified circumstances. For example:

• IAS 2 does not permit selling costs to be capitalised as inventory if the real estate units are considered to be inventory.
• IAS 16 does not permit these costs to be capitalised as property, plant and equipment except in the unusual case that they are directly attributable to preparing the asset to be used.
• IAS 11 excludes selling costs from the costs of a construction contract.

IAS 38: Compliance costs for REACH

Issue: How to account for costs incurred to comply with the requirements of the European Regulation concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), which took effect on 1 June 2007?

Decision Not to Add: July 2009

Reason: The IFRIC noted that IAS 38 includes definitions and recognition criteria for intangible assets that provide guidance to enable entities to account for the costs of complying with the REACH regulation. The IFRIC concluded that any guidance it could develop beyond that already given would be more in the nature of implementation guidance than an interpretation. For this reason, the IFRIC decided not to add the issue to its agenda.

IAS 38: Amortisation method for intangible assets

Issue: what does 'consumption of economic benefits' mean when determining the appropriate amortisation method for an intangible asset with a finite useful life? Are straight-line and the unit of production method (including a revenue-based unit of production method) acceptable?

Decision Not to Add: January 2010

Reason: Members of IFRIC were divided on this issue. Some felt that an interpretation could assist in reducing diversity in the implementation of this principle, while others considered that any guidance would be in the nature of application guidance. The IFRIC noted that the determination of the amortisation method is therefore a matter of judgement, and such judgements should be disclosed. Given the diversity of views, the IFRIC concluded that it would not be able to reach a consensus on the issue on a timely basis. Consequently, the IFRIC decided not to add the issue to its agenda.

IAS 39: Meaning of 'other-than-temporary impairment and its application to certain investments

Issue: In connection with its discussion of EITF Issue No. 02-14 Whether the Equity Method of Accounting Applies When an Investor Does Not Have an Investment in Voting Stock of an Investee but Exercises Significant Influence through Other Means, at the 21 November 2002 meeting, the EITF discussed the meaning of other-than-temporary impairment and its application to certain investments carried at cost. The EITF requested that the FASB staff consider other impairment models within U.S. GAAP when developing its views. The EITF also requested that the scope of the impairment issue be expanded to include equity method investments and investments subject to FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities, and that that issue be addressed by the EITF as a separate issue.

Decision Not to Add: April 2003

Reason: The IFRIC agreed to not take this issue onto the agenda because it may be affected by the Board's decisions in its project on proposed amendments to IAS 32, and IAS 39. The distinction between an impairment (or reversal of an impairment) and other falls (or rises) in value was considered by the Board when improving IAS 39. While IFRS does not contain the notion of 'other than temporary' impairment, IAS 39.61 (December 2003) states that: "...A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment..."

IAS 39: The 'closely related' criterion for embedded derivatives

Issue: The IFRIC considered providing guidance on the meaning of 'closely related' in the context of embedded derivatives in IAS 39.

Decision Not to Add: October 2003

Reason: The IFRIC decided not to address this issue because:

• changing the approach in IAS 39 would go beyond providing an Interpretation of existing guidance.
• the IFRIC would not have sufficient time to provide input to the Board's project to improve IAS 39, given the need to finalise that Standard within a short timeframe.

This issue is expected to be addressed in the revised IAS 39.

IAS 39: Impairment – accounting for incurred losses

Issue: The IFRIC considered whether under IAS 39 an entity should recognise an impairment on a group of loans if its loss expectation at initial recognition of the loans had not changed, but the entity could estimate reliably, based on past history, that loss events occurred after initial recognition, but before the reporting date.

Decision Not to Add: October 2004

Reason:

The IFRIC agreed that the interpretation of the Standard was clear and that an entity should recognise such an incurred impairment loss that is supported by objective evidence, which might not have been reported before the entity's reporting date. However, an impairment loss could not be recognised if relevant events had not been recognised. The IFRIC recommended that the IASCF education team should consider this issue for possible inclusion in educational material.

IAS 39: Effective interest rate

Issue: The IFRIC considered whether future credit losses should be included in determining effective interest rates.

Decision Not to Add: October 2004

Reason: The IFRIC agreed that IFRSs was clear on this issue. Paragraph 9 of IAS 39 states that when calculating effective interest rate an entity shall not consider future credit losses. Also, IAS 39 Implementation Guidance issue B26 provides further guidance on the matter.

IAS 39: Commodity price risk hedging

Issue: The IFRIC considered whether, under IAS 39, a non-financial instrument can be separated into price risk components, with the component that relates to an efficient, liquid and regulated commodity exchange being designated as the hedged item (rather than the price risk of the entire non-financial item).

Decision Not to Add: October 2004

Reason: The IFRIC agreed that IAS 39 paragraphs 82 and AG100 provide clear guidance on the matter. The IFRIC also noted that to allow separation of a non-financial asset into price risk components with the separate components being designated as the hedged item would require an amendment to IAS 39 rather than an Interpretation.

IAS 39: Single instrument designated as a hedge of more than one type of risk

Issue: The IFRIC considered whether, when a single hedging instrument is designated as a hedge of more than one type of risk, the effectiveness test can be carried out for the total hedged position, which incorporates all risks identified, if these risks are inextricably linked in the hedging instrument.

Decision Not to Add: October 2004

Reason: The IFRIC agreed that IAS 39 was clear on the matter. The Standard does not require separate effectiveness testing when a single hedging instrument is designated as a hedge of more than one type of risk. The IFRIC also noted that the issue is neither widespread nor pervasive at present

IAS 39: Hedge effectiveness tests - vacillations in effectiveness/timing of tests

Issue: The IFRIC considered whether under IAS 39 an entity that designates a hedging instrument in a hedge that fails the retrospective effectiveness test can subsequently redesignate the hedging instrument in a hedge of the same financial asset or liability and obtain hedge accounting for a subsequent period in which the hedge is effective.

Decision Not to Add: June 2005

Reason: The IFRIC noted that the Standard did not preclude redesignation of the hedging instrument in a hedge of the same financial asset or liability in a subsequent period provided the hedge meets the hedge accounting requirements in IAS 39. It concluded that, although having practical relevance, the issue did not involve significantly divergent interpretations. Accordingly, the IFRIC decided not to add the topic to its agenda.

IAS 39: Impairment of an equity instrument

Issue: The IFRIC considered whether to develop guidance on how to determine whether under paragraph 61 of IAS 39 (as revised in March 2004) there has been a 'significant or prolonged decline' in the fair value of an equity instrument below its cost in the situation when an impairment loss has previously been recognised for an investment classified as available for sale.

Decision Not to Add: June 2005

Reason: The IFRIC decided not to develop any guidance on this issue. The IFRIC noted that IAS 39 referred to original cost on initial recognition and did not regard a prior impairment as having established a new cost basis. The IFRIC also noted that IAS 39 Implementation Guidance E.4.9 states that further declines in value after an impairment loss is recognised in profit or loss are also recognised in profit or loss. Therefore, for an equity instrument for which a prior impairment loss has been recognised, 'significant' should be evaluated against the original cost at initial recognition and 'prolonged' should be evaluated against the period in which the fair value of the investment has been below original cost at initial recognition. The IFRIC was of the view that IAS 39 is clear on these points when all of the evidence in the requirements and the implementation guidance of IAS 39 are viewed together.

IAS 39: Meaning of delivery

Issue: The IFRIC considered the application of the 'own purchase, sale or usage requirements' scope exemption in paragraph 5 of IAS 39 when:

• the market design or process imposes a structure or intermediary (eg a gold refiner or an electricity market operator) that prevents the producer from physically delivering its production to the counterparty of the hedge pricing contract; and
• in some cases, physical delivery is to the intermediary for the spot price, even if the producer is protected from spot price risk by a separate contract that effectively sets a fixed price for the producer's production.

Decision Not to Add: August 2005

Reason: The IFRIC noted that 'delivery' for the purposes of the paragraph 5 exemption is not necessarily restricted to the physical delivery of the underlying to a specific customer, as physical delivery is not a condition of the exemption. The IFRIC was of the view that delivery of gold to a refiner in return for an allocation of an equivalent quantity of refined gold was not delivery, but that allocation of that refined gold to a customer's account could be regarded as delivery. The IFRIC decided not to develop guidance on the meaning of 'delivery' as it was not aware of evidence of significant diversity in practice. The IFRIC indicated that a synthetic arrangement that results from the linking of a non deliverable contract entered into with a customer to fix the price of a commodity with a transaction to buy or sell the commodity through an intermediary would not satisfy the paragraph 5 scope exemption. The IFRIC decided not to add this topic to its agenda, since IAS 39 was clear on both points.

IAS 39: Retention of servicing rights

Issue: The IFRIC was asked to provide guidance on whether an arrangement under which an entity has transferred the contractual rights to receive the cash flows of a financial asset but continues to provide servicing on the transferred asset would fail the definition of a transfer of cash flows in terms of IAS 39 paragraph 18(a).

Decision Not to Add: November 2005

Reason: The IFRIC noted that paragraph 18(a) focuses on whether an entity transfers the contractual rights to receive the cash flows from a financial asset. The determination of whether the contractual rights to cash flows have been transferred is not affected by the transferor retaining the role of an agent to administer collection and distribution of cash flows. Therefore, retention of servicing rights by the entity transferring the financial asset does not in itself cause the transfer to fail the requirements in paragraph 18 (a) of IAS 39. The IFRIC decided not to add the issue to its agenda as it did not expect significant diversity in practice to arise.

IAS 39: Revolving structures

Issue: The IFRIC discussed a request for guidance on whether 'revolving' structures would meet the pass-through requirements in paragraph 19(c) of IAS 39. In a revolving structure an entity collects cash flows on behalf of eventual recipients and uses the amounts collected to purchase new assets instead of remitting the cash to the eventual recipients. On maturity the principal amount is remitted to the eventual recipients from the cash flows arising from the reinvested assets.

Decision Not to Add: November 2005

Reason: The IFRIC noted that in order to meet the pass-through arrangement requirements in IAS 39 paragraph 19 (c) an entity is required to remit any cash flows it collects on behalf of eventual recipients without material delay. This paragraph also limits permissible reinvestments to items that qualify as cash or cash equivalents. Most revolving arrangements would involve a material delay before the original collection of cash is remitted. Furthermore, the nature of the new assets typically acquired means that most revolving arrangements involve reinvestment in assets that would not qualify as cash or cash equivalents. Therefore, it is clear that such structures would not meet the requirements in paragraph 19 (c) of IAS 39. Consequently, the IFRIC decided not to add the issue to its agenda as it did not expect significant diversity in practice to arise.

IAS 39: Valuation of electricity

Issue: Are principal-to-principal derivatives designed to fix the price of a supply of electricity by linking it with a transaction to buy or sell the electricity through an intermediary within the scope of IAS 39 and, if so, how should they be valued?

Decision Not to Add: November 2006

Reason: The IFRIC concluded that the only exception from fair valuation of derivatives in IAS 39 is for derivatives linked to unquoted equity instruments, which is not the case here. Therefore these electricity derivatives are within IAS 39. IAS 39 contains general principles on how to measure fair value. The IFRIC decided that it should not seek to develop more detailed guidance on this topic, since the subject was too specific.

IAS 39: Testing of hedge effectiveness on a cumulative basis

Issue: If an entity uses regression analysis to assess both retrospective and prospective hedge effectiveness, and the changes in the fair value or cash flows of the hedging instrument was outside a range of 80-125 per cent, does the entity fail to qualify for hedge accounting?

Decision Not to Add: November 2006

Reason: The IFRIC observed that IAS 39 does not specify a single method for assessing retrospective and prospective hedge effectiveness. The method used should be document and used consistently over the life of the hedge. The IFRIC believed that the fact that the comparison of the changes in the fair value or cash flows of the hedged items and the changes in the fair value or cash flows of the hedging instrument falls outside a range of 80-125 per cent does not necessarily result in the entity failing to qualify for hedge accounting. However, regardless of how hedge effectiveness is assessed, IAS 39 requires any hedge ineffectiveness to be recognised in profit or loss.

IAS 39: Definition of a derivative – Indexation on own EBITDA or own revenue

Issue: Whether a contract that is indexed to an entity's own revenue or own earnings before interest, tax, depreciation and amortisation (EDITDA) is (or might contain) a derivative. More specifically:

• Whether the exclusion from the definition of a derivative of contracts linked to non-financial variables that are specific to a party to the contract applies only to insurance contracts.
• Whether EBITDA or revenue is a financial or non-financial variable.

Decision Not to Add: January 2007

Reason: The IFRIC directed the staff to refer the issue to the Board. The IFRIC recommended that the Board should amend IAS 39 (possibly as part of the annual improvements process) to limit to insurance contracts the exclusion from the definition of a derivative of contracts linked to non-financial variables that are specific to a party to the contract.

IAS 39: Short trading

Issue: Whether short sales of securities should be eligible for the regular way exceptions – that is, whether entities that enter into short sales are permitted to choose trade date or settlement date accounting.

Decision Not to Add: January 2007

Reason: Accounting practice under IAS 39 generally recognises the short sales as financial liabilities at fair value with changes in fair value recognised in profit or loss. Under the industry practice, the same profit or loss amount is recognised as would have been recognised if short sales of securities were accounted for as derivatives but the securities are presented differently on the balance sheet. The IFRIC acknowledged that requiring entities to account for the short positions as derivatives may create considerable practical problems for their accounting systems and controls with little, if any, improvement to the quality of the financial information presented. For these reasons and because there is little diversity in practice, the IFRIC decided not to take the issue onto the agenda.

IAS 39 and IAS 27: Financial Instruments puttable at an amount other than Fair Value

Issue: The issues are:

• how the puttable instruments should be accounted for in the financial statements of the holders, in particular, whether the accounting for the instruments in the financial statements of the holders should be symmetrical with that in the financial statements of the issuer
• whether an entity that has control over an entity that has no equity instruments in issue is required to present consolidated financial statements in accordance with IAS 27 as well as to recognise goodwill in accordance with IFRS 3.

Decision Not to Add: January 2007

Reason:

Regarding the first issue, IAS 32 and IAS 39 do not directly address whether the accounting for financial instruments in the financial statements of the holders should be symmetrical with that in the financial statements of the issuer. However, the issuer of a financial instrument is required to classify it in accordance with IAS 32, whereas the holder is required to classify and account for it in accordance with IAS 39. In the light of the existing guidance in IAS 39, the IFRIC decided that the first issue should not be taken onto the agenda.

Regarding the second issue, the control of a subsidiary, and the resulting requirement for a parent to present consolidated financial statements in accordance with IAS 27 (including the requirement to recognise goodwill in accordance with IFRS 3), does not necessarily depend on the parent's owning equity instruments of the subsidiary. The IFRIC, therefore, decided not to take the second issue onto the agenda.

IAS 39: Written options in retail energy contracts

Issue: What is meant by 'written option' within the context of paragraph 7 of IAS 39? Under that paragraph, a written option to buy or sell a non-financial item that can be net settled cannot be considered to have been entered into for the purpose of meeting the reporting entity's normal purchase, sale and usage requirements. The submission was primarily concerned with the accounting for energy supply contracts to retail customers.

Decision Not to Add: March 2007

Reason: Analysis of such contracts suggests that in many situations they do not meet the net settlement criteria laid out in paragraphs 5 and 6 of IAS 39. If this is the case, such contracts would not be considered to be within the scope of IAS 39. In the light of this analysis, the IFRIC expected little divergence in practice and therefore decided not to take the item onto the agenda.

IAS 39: Assessing Hedge Effectiveness of an Interest Rate Swap in a Cash Flow Hedge

Issue: When an entity designates an interest rate swap as a hedging instrument in a cash flow hedge, is the entity allowed to consider only the undiscounted changes in cash flows of the hedging instrument and the hedged item in assessing hedge effectiveness for hedge qualification purposes?

Decision Not to Add: March 2007

Reason: The IFRIC noted that when an interest rate swap is designated as a hedging instrument, a reason for ineffectiveness is the mismatch of the timing of interest payments or receipts of the swap and the hedged item. To take into account the timing of cash flows from interest payments or receipts in assessing hedge effectiveness, entities need also to take into account the time value of money. IAS 39 is clear in this regard. Therefore, comparing only the changes in undiscounted cash flows of an interest rate swap and the changes in undiscounted cash flows of the hedged item is inadequate for assessing hedge effectiveness. The IFRIC did not expect significant diversity in practice in the application of those requirements.

IAS 39: Wagers received by a gaming institution

Issue: How should a gaming institution account for wagers received?

Decision Not to Add: July 2007

Reason: The IFRIC did not consider that there was widespread divergence in practice in this area and therefore decided not to take the issue on to its agenda:

• When a gaming institution takes a position against a customer, the resulting unsettled wager is a financial instrument that is likely to meet the definition of a derivative financial instrument and should be accounted for under IAS 39.
• In other situations, a gaming institution does not take positions against customers but instead provides services to manage the organisation of games between two or more gaming parties. The gaming institution earns a commission for such services regardless of the outcome of the wager. The IFRIC noted that such a commission was likely to meet the definition of revenue and would be recognised when the conditions in IAS 18 Revenue were met.

IAS 39: Hedging multiple risks with a single derivative hedging instrument

Issue: How should an entity apply the requirements of paragraph 76(b) of IAS 39 to demonstrate hedge effectiveness when it designates a single derivative hedging instrument as a hedge of more than one type of risk?

Decision Not to Add: July 2007

Reason: The IFRIC decided not to take the issue on to the agenda because any guidance developed would be more in the nature of application guidance than an interpretation. The IFRIC noted that IAS 39 requires an entity to assess the hedge effectiveness of each different risk position separately (Implementation Guidance Question F.1.13). In order to satisfy this requirement, IG F.1.13 imputed equal and opposite functional currency legs, which did not exist in the contractual terms of the derivative hedging instrument, as a basis to split the fair value of the derivative hedging instrument into multiple components. In addition, IG F.1.12 permits an entity to designate a derivative simultaneously as a hedging instrument in both a cash flow hedge and a fair value hedge. The submission asked whether the approach set out in IG F.1.13 can be extended to other circumstances. The IFRIC noted that, although IG F.1.12 and IG F.1.13 allow an entity to impute a notional leg as a means of splitting the fair value of a derivative hedging instrument into multiple components for assessing hedge effectiveness, the split should not result in the recognition of cash flows that do not exist in the contractual terms of a financial instrument (see Question C.1 of the Guidance on Implementing IAS 39). In addition, the IFRIC noted that IAS 39 requires an entity to document, at the inception of the hedge, how it will assess hedge effectiveness. IAS 39 requires the entity to apply the chosen method consistently over the life of the hedging relationship.

IAS 39: Hedging future cash flows with purchased options

Issue: The IFRIC was asked whether IAS 39 allows the following hedging approach: An entity designates an option, in its entirety, as a hedging instrument to hedge a one-sided variability in future cash flows in a cash flow hedge. All changes in the fair value of the option (including changes in the time value component) are considered in assessing and measuring hedge effectiveness. Can an entity compare all changes in the fair value of the purchased option with changes in the fair value of a hypothetical written option that has the same maturity date and notional amount as the hedged item to assess hedge effectiveness? Such an approach would minimise or eliminate hedge ineffectiveness when the terms of the purchased option and the hypothetical written option perfectly matched.

Decision Not to Add: September 2007

Reason: The IFRIC acknowledged that some respondents to its tentative agenda decision believed was diversity in practice. However, the IFRIC decided not to take the issue on to its agenda because the Board has recently decided to propose an amendment to IAS 39 to clarify which risks and cash flows can be designated as hedged risks and hedged portions of risks for hedge accounting purposes. The IFRIC noted that the Board's project is expected to address the issue discussed in this agenda decision.

IAS 39: Scope of IAS 39 paragraph 2(g)

Issue: IAS 39 paragraph 2(g) exempts from the scope of IAS 39 'contracts between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date.' The issue is whether this scope exception applies only to binding contracts to acquire shares that constitute a controlling interest in another entity within the period necessary to complete a business combination, or if it applies more widely. Also, can this scope exception could be applied to other similar transactions, such as those to acquire an interest in an associate?

Decision Not to Add: January 2008

Reason: The IFRIC acknowledged that the wording in paragraph 2(g) of IAS 39 is ambiguous and could lead to diversity in practice. For this reason, the IFRIC decided to ask the Board to clarify the standard, addressing in particular:

• whether the scope exception in paragraph 2(g) applies to all contracts (including options) between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date.
• whether the scope exception provided in paragraph 2(g) could be applied to similar transactions, such as those to acquire an interest in an associate.

IAS 39: Application of the Effective Interest Rate Method

Issue: How should the effective interest rate method be applied to a financial instrument whose cash flows are linked to changes in an inflation index?

Decision Not to Add: July 2008

Reason: Paragraphs AG5-AG8 of IAS 39 provide relevant application guidance for applying the effective interest method to financial instruments with floating interest rates. In deciding not to add this issue to its agenda, the IFRIC decided to refer the issue to the IASB for possible future clarification.

IAS 39: Valuation of Restricted Securities

Issue: In measuring fair value, must a discount be applied to the quoted market price of a security when there is a contractual, government, or other restriction that prevents sale of the security for a specified period of time?

Decision Not to Add: November 2008

Reason: IFRIC noted that the Board is working on a project on fair value measurement. Guidance on this question should be provided by the Board as part of that project.

IAS 39: Two derecognition issues

Issue: 1. When are financial assets 'similar' for the purpose of applying the IAS 39 derecognition tests to a group of similar assets? 2. When should the 'pass-through test' be applied to a transfer of a financial asset?

Decision Not to Add: March 2009

Reason: After these issues were raised with the IFRIC, the IASB added to its agenda an accelerated project on Derecognition of Financial Instruments. A final Standard is planned for 2010. Therefore, the IFRIC decided not to add the project to its agenda.

IAS 39: Determining the discount rate for fair value measurements of financial instruments in inactive markets

Issue: What should be the discount rate when fair value is established using a valuation technique in an illiquid market? How are the credit spread and liquidity spread components of the discount rate determined?

Decision Not to Add: March 2009

Reason: The IASB has recently published some Guidance on Determining Fair Values in Illiquid Markets. Further, the IASB is in the midst of a project on Fair Value Measurement. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 39: Participation rights and calculation of the effective interest rate

Issue: How does an issuer calculate the effective interest rate for a financial liability that gives the holder a percentage of the issuer's net income but reduces the maturity amount of the debt for the holder's share of the issuer's losses?

Decision Not to Add: May 2009

Reason: The IFRIC concluded that paragraphs AG6 and AG8 of IAS 39 provide relevant guidance for measuring financial liabilities at amortised cost using the effective interest rate method. Therefore, the IFRIC decided not to add the issue to its agenda.

IAS 39: Classification of failed loan syndications

Issue: If a loan originator originates a group of loans with an intent to syndicate and sell them in the near term, is unable to find sufficient buyers (a failed syndication), but continues to try to sell the surplus loans in the near term, is that surplus amount considered held for trading?

Decision Not to Add: May 2009

Reason: IAS 39 is clear that a loan intended to be sold immediately or in the near term is classified as held for trading. If, however, the entity has decided not to sell the loan, it would be reclassified out of held for trading. Because the guidance in IAS 39 is clear, the IFRIC decided not to add the issue to its agenda.

IAS 39: Hedging using more than one derivative as the hedging instrument

Issue: How to apply the guidance in IAS 39 Q&A F.2.1 Whether a derivative can be designated as a hedged item when an entity issues fixed interest rate foreign currency debt and then swaps it into floating interest rate local currency debt using a cross currency interest rate swap? Does this guidance prevent cash flows attributable to a derivative from being designated as the hedged cash flow in a hedge relationship?

Decision Not to Add: July 2009

Reason: The IFRIC noted that although IAS 39 permits a combination of derivatives to be jointly designated as the hedging instrument in a hedging relationship, it does not allow a 'synthetic hedged item' created by combining one derivative with a non-derivative financial instrument to be designated as the hedged item in a hedging relationship with another derivative. The IFRIC concluded that any guidance it could provide would be in the nature of implementation guidance rather than an interpretation. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 39: Meaning of 'significant or prolonged'

Issue: What is the meaning of 'significant or prolonged' in IAS 39.61 in recognising impairment on available-for-sale equity instruments in accordance with IAS 39?

Decision Not to Add: July 2009

Reason: Although the IFRIC recognised that significant diversity exists in practice, it noted that the Board has accelerated its project to develop a replacement for IAS 39 and expects to issue a new standard soon. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 39: Unit of account for forward contracts with volumetric optionality

Issue: A contract (a) obliges an entity to deliver (sell) at a fixed price a fixed number of units of a non-financial item that is readily convertible to cash and (b) provides the counterparty with the option to purchase also at a fixed price a fixed number of additional units of the same item. Can this contract be assessed as two separate contracts for the purpose of applying paragraphs 5-7 of IAS 39? Those paragraphs provide guidance on whether a contract to buy or sell a non-financial item is within the scope of IAS 39.

Decision Not to Add: March 2010

Reason: The IFRIC acknowledged that significant diversity exists in practice. However, the IASB is working on an accelerated project to replace IAS 39 and expects to issue a new standard by the end of 2010. This issue is in the scope of that project. Therefore, the IFRIC decided not to add this issue to its agenda.

IAS 12 and IAS 40: Non-depreciable and depreciable assets

Issue: 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)?

Decision Not to Add: August 2002

Reason: The IFRIC agreed not to require publication of an Interpretation on this issue because SIC-21 , IAS 16, and IAS 12 provide adequate guidance.

IAS 41: Discount rate used in fair value calculations

Issue: How should an entity determine the appropriate discount rate when the fair value of biological assets is estimated as the present value of expected net cash flows?

Decision Not to Add: May 2009

Reason: The IFRIC concluded that the general guidance in IFRSs on measuring fair value – including guidance on the appropriate discount rate – should apply to measuring biological assets. IAS 41.24 says that if little biological transformation has taken place since the initial cost of a biological asset was incurred, the discount rate selected would be expected to result in a value that approximates that cost. The IFRIC concluded that it would not expect significant diversity to arise in practice because of the guidance already in IFRSs.

SIC 12: Relinquishment of control

Issue: What relative weight should be given to the various indicators in paragraph 10 of SIC-12 Consolidation–Special Purpose Entities in determining who should consolidate an SPE. Specifically, if all the decisions necessary for the ongoing activities of the SPE had been predetermined by its creator and the majority of the 'equity interest tranche' has been transferred to a third party, which factors are more important for determining control: (1) the benefits and risks factors specified in paragraph 10(c) and (d) or (2) the factors in paragraph 10(a) (activities of the SPE conducted in accordance with specific business needs of one party) and paragraph 10(b) (one party has decision-making powers or has delegated them by setting up an 'autopilot' mechanism).

Decision Not to Add: August 2002

Reason: The IFRIC noted that the factors set out in paragraph 10 of SIC-12 are indicators only and not necessarily conclusive. The IFRIC believed that this approach was deliberate, in acknowledgement of the fact that circumstances vary case by case. In the IFRIC's view, SIC-12 requires that the party having control over an SPE should be determined through the exercise of judgement and skill in each case, after taking into account all relevant factors. For this reason, the IFRIC decided not to take the issue onto the agenda.

IFRIC 12: Scope of IFRIC 12

Issue: Two issues:

• Does the requirement that the grantor control or regulate the price the operator can charge to users of the service provided by the infrastructure require that the grantor have complete control?
• How to account for aspects of the arrangement other than the infrastructure?

Decision Not to Add: July 2009

Reason: Regarding the first issue, the IFRIC noted that paragraphs AG2 and AG3 of IFRIC 12 do not require the grantor to have complete control of the price. Regarding the second issue, the IFRIC concluded that IFRIC 12 provides some guidance on accounting for other aspects of the arrangement.

IFRIC 14: Stable workforce assumption

Issue: Does the 'stable workforce' assumption in IFRIC 14 allow an entity to 'manage' its reported earnings by choosing the timing and level of its contributions to a defined benefit plan?

Decision Not to Add: August 2002

Reason: The IFRIC concluded that the 'stable workforce' assumption in IFRIC 14 is clear and not subject to misinterpretation. Moreover this issue was discussed during development of IFRIC 14. Therefore, the IFRIC decided not to take the issue onto the agenda.

IFRIC 14: Voluntary prepayments

Issue: The requirements of IFRIC 14 may produce unintended consequences in the treatment of voluntary prepaid contributions under a minimum funding requirement. This is because paragraph 22 of IFRIC 14 requires an entity to include particular expected cash outflows in assessing whether there is an asset at the reporting date. In some cases, including these cash flows implies there is a liability at the reporting date when there is not.

Decision Not to Add: May 2009

Reason: At the IASB's meeting in January 2009, the Board decided to proceed with its own project to amend IFRIC 14 to address the issue. Consequently, the IFRIC decided to remove the issue from its agenda.

IFRIC 18: Applicability to the customer

Issue: How should the customer account for a transfer of assets that is in the scope of IFRIC 18 for the recipient?

Decision Not to Add: July 2009

Reason: The IFRIC noted that IFRIC 18 addresses only the accounting by the recipient of the transferred assets. However, the IFRIC also noted that the accounting by customers transferring assets should be consistent with the principles in IFRIC 18. Moreover, other IFRSs provide relevant guidance for accounting for the goods or services received or given up in the exchange transaction.