 IAS 16 Property, Plant and Equipment – Accounting for production phase stripping costs in the mining industry
The Committee discussed a working draft of a draft Interpretation on accounting for stripping costs in the production phase.
Is the definition of an asset met?
The working draft of the Interpretation states that when the benefit of improved access created by stripping activity meets the definition of an asset that asset should be recognised as an enhancement of an existing asset. The 'new' asset follows the classification of the existing asset (that is, as tangible or intangible).
Several members of the Committee were troubled by aspects of this conclusion. Some thought that if the 'enhancement' met the definition of an asset, it should be recognised as a discrete asset and not added to another one. The idea of recognising additional components of an asset was particularly troubling in the situations in which the 'original' asset was an intangible asset (IAS 38 does not include explicitly the concept of components). The Chairman, who led the technical discussion throughout this session (rather than the staff), disagreed and suggested that it would be possible to interpret IAS 38.57 as encompassing components in the light of IAS 16's requirements.
Some Committee members were intrigued that component accounting might be read into IAS 38, but were worried that this might unleash unintended consequences. In particular, those members were concerned about very long-lived components (for example, 'life of mine' components) being recognised. To avoid such consequences, the draft Interpretation would need to explain the notion of a 'stripping campaign' rigorously. The Chairman noted that stripping campaigns were of short duration and that 'life-of-mine' units of account were not contemplated.
Committee members suggested that, should this argument be accepted, the draft Interpretation should state that the costs deferred and recognised as an asset should be recognised as a component of an existing asset. In addition, the supporting material (Basis for Conclusions, Application or Implementation Guidance) should expand the discussion around why the asset recognition criteria have been met for something that often looks like a period cost.
Committee members were also uneasy with the idea that the 'stripping campaign component' asset could be tangible or intangible. However, other Committee members observed that because legal and operational situations vary between jurisdictions, 'the asset' to which the stripping campaign refers would differ: in some cases it would be tangible; in others intangible. For example, in some jurisdictions the entity might own the land, in which case the asset would be tangible; in other jurisdictions only the rights to minerals or oil and gas deposits in the land-rights are often considered intangible assets. This point would be addressed in the Basis for Conclusions.
A Committee member noted that the discussion of whether the stripping costs meet the discussion of an asset was misplaced in the draft Interpretation and that this probably accounted for the degree of discomfort on the Committee. The Chairman agreed and recommended that the discussion, which clarifies that when stripping activity is routinely undertaken to access ore which will be mined in the current period, that activity does not meet the definition of an asset and the stripping costs should be accounted for as a cost of current production, should precede that stating what happens when asset recognition is appropriate.
The Chairman concluded this part of the debate, suggesting that there was sufficient support among the Committee members to proceed; however, the next version of the draft Interpretation should:
- explain why deferred costs of a stripping campaign meet the definition of an asset but are not recognised as a separate asset;
- explain why a stripping campaign is a component of another asset;
- make no comment on whether a stripping campaign component is tangible or intangible in nature;
- explain how it is possible to analogise the requirements in IAS 16 with respect to components to permit the recognition of components of an intangible asset under IAS 38.
- be unequivocal that routine stripping activities would not normally meet the definition of a stripping campaign subject to the Interpretation.
Initial recognition and measurement
The Committee agreed that the stripping campaign component should be specifically associated (or identified) with an identified body of ore (or an oil and gas deposit) benefitting from the stripping campaign. The Chairman noted that a stripping campaign presupposes that the mine or oil and gas deposit has entered the production phase and that a stripping campaign is an activity directly related to an identified body of ore directly beneath (and therefore associated with) the overburden being removed.
Committee members accepted the Chairman's characterisation of the activities, but noted that this proved that the 'campaign' should be tightly defined, so that the beginning and end of each campaign is clear. This would also assist defining when and over what period the campaign should be depreciated (amortised).
Subsequent measurement
The Committee did not consider that specific requirements were necessary, the requirements of IASs 16, 36 and 38 being sufficient, with one exception. The Interpretation should clarify what happens to the carrying amount of a stripping campaign component when mining activity is halted for a time (for example, because commodity prices are unfavourable) versus when all activity ceases. It was agreed that there was guidance on idle assets in IAS 16 as well as the general impairment guidance that could be drawn upon.
Disclosure
Disclosures were not discussed specifically, but the draft Interpretation does not prescribe any disclosure, relying on the underlying IFRSs.
Transition
The Committee did not support the transition requirements as drafted. In addition, several Committee members criticised the lack of guidance for first time adopters. Prospective application would allow 'inappropriate' assets to remain in the financial statements, when such assets should be removed on transition to IFRS.
The Chairman asked Jean Paré to investigate the approach being adopted in Canada (currently in its transition year), especially by those 'junior exploration' entities that are currently applying guidance developed by the Canadian Emerging Issues Committee on the topic of deferred stripping costs.
A Committee member asked for a longer than usual effective date (issue + three months). However, the Chairman did not support this idea. In his view, 'it's not hard to do: the financial reporting answer may be uncomfortable, but the accounting is not hard to do.'
Conclusion
The Chairman closed the discussion noting that the staff would prepare a revised draft Interpretation to be presented at the Committee meeting in July 2010. It would be the intention to approve the draft for exposure at that meeting. The Chairman noted that, while he might have an opinion on the draft when presented to the IASB, he would no longer have a vote!
IFRS 2 Share-based Payment – Vesting and non-vesting conditions
The staff prepared a comprehensive analysis of proposed classifications of vesting and non-vesting conditions and their interaction as requested by the Committee in March.
From the start of the discussion, even before debating the technical issues themselves, several Committee members expressed their concerns that the whole technical analysis, albeit very useful for further development of the Standard (and a post implementation review of IFRS 2 Share-based payments) showed that a fundamental analysis of IFRS 2 would be required. They argued that the staff analysis was very broad and if implemented would require substantial rewrite of the Standard and thus the issue was too big to be considered by the Committee. Therefore, these members urged the Committee to focus more narrowly on the specific issues that were raised by constituents.
Several Committee members were concerned with the interaction of the proposed changes and the review of the IFRS 2 currently being performed by the French standard setter on behalf of the Board (in order to identify principles of IFRS 2).
Nonetheless, Jean-Louis Lebrun (chairman of the working group at the French standard setter) clarified that the analysis would be useful for the analysis being performed and thus there was little scope for an overlap.
On the other hand, several Committee members fully supported the staff's proposal how to proceed, whether with interpretation or an interpretation accompanies with a recommendation to the Board to amend IFRS 2.
The staff proposed the following amendments that should lead to clarification of the application of the vesting and non-vesting condition and achieve consistency with general understanding of a common terminology. The summary of the staff proposal is as follows:
| Item | Proposed amendment |
|---|
| Vesting condition | The definition of vesting condition should be clarified to address/ incorporate the following: (1) the counterparty perspective, (2) a required explicit or implicit service requirement, and (3) the elimination of descriptions of specific conditions. |
| Non-vesting condition | A stand-alone definition of non-vesting condition should be incorporated into IFRSs and encompass all conditions that do not determine entitlement. |
| Service condition | A stand-alone definition of service condition should be incorporated into IFRSs and should be restricted to only a service requirement over a determined period of time. |
| Performance condition | A stand-alone definition of performance condition should be incorporated into IFRSs and should be restricted targets that relate to solely to an entity's operations or activities. Additionally, examples similar to those provided in the US GAAP definition should be incorporated. |
| Market condition | The definition of market condition should be removed from IFRS 2. Additionally, the concept of a market condition should continue to be captured as a vesting condition within the stand-alone definition of other vesting conditions. |
| Other vesting condition | A stand-alone definition of other vesting condition should be incorporated into IFRSs that should encompass all conditions that determine the counterparty's entitlement provided the condition is not categorised as a service or performance condition. |
| Contingent feature | Guidance on a contingent feature (inclusive of reload and non-compete provisions) as well as guidance on whether grant date measurement and subsequent measurements should be incorporated into IFRSs. |
| Vesting period | The definition of vesting period should be revised to capture the concept of the explicit or implicit service period required for an individual vesting condition. |
| Attribution period | A stand-alone definition of attribution period should be incorporated into IFRSs and capture the period of time over which the share-based payment award is recognised. This is the result of the interaction of multiple vesting conditions. |
| Multiple vesting conditions | Application guidance should be incorporated into IFRSs addressing the interaction of multiple conditions by either 'or' or 'and' conditions. |
Several Committee members expressed their concerns that the staff proposals reversed the conclusion the Board reached in the 2008 Amendment to IFRS2: Vesting Conditions and Cancelations in relation to the perspective from which vesting condition is defined. The 2008 Amendment changed the perspective from the employee to the employer; the staff analysis suggested changing the perspective back to how it was originally framed in IFRS 2. These Committee members questioned the change given that the Board specifically addressed the issue two years ago. The Chairman and the staff responded that 2008 Amendment was driven by practical considerations and the desire to have consistent accounting treatment. The staff proposed that as IFRS 2 is generally a rules-based standard, an exception for particular products would be retained. That approach could be used for conditions that are quite common but are not easily classified (for example, change of control).
One Committee member was concerned that the proposals would not clarify the issue and could lead to unintended consequences. In his opinion, such amendments bring no additional benefits as they introduce new concepts to the Standard. In addition, he thought that some of the issues raised do not require clarification at all.
There was some confusion whether the proposed amendments would or would not change the actual accounting. After a considerable debate the Committee members asked the staff to analyse the accounting treatment impact of the changes on some practical examples (that is, supplement the classification examples with the impact on measurement). In general, majority of the committee implied that the accounting treatment should not change significantly based on these conditions, even though some changes would be required (for some of the issues as well for entities that applied the principles in a different manner as proposed).
Some Committee members felt that the proposals provide guidance and clarity where no guidance existed before. These members also noted that some of these amendments contribute to convergence with the US GAAP and the vesting and non-vesting conditions are not generally challenged under US GAAP.
The Committee in general agreed with the proposal guidance for multiple vesting conditions and their interaction. Nonetheless, the Committee members were reluctant to introduce a concept of attribution period, majority of them preferred to refer to them as multiple vesting periods but covering the same concept.
The Committee resumed its discussion of these issues considering a subsequent Agenda Paper that was not distributed to Observers nor released on the IASB's Website before these notes were prepared.
The summary seemed to help Committee members identify the principle that differentiates a vesting condition from a non-vesting condition. However, Committee members suggested that, in addition, further work was necessary on the definition of a performance condition. This work would need to address, among others, the performance of whom: the entity or the employee; and performance compared to what? However, Committee members seemed to be satisfied that the staff analysis provided them with sufficient direction that the issues raised in the submission could be addressed in a satisfactory manner.
Conclusion
The Chairman asked whether the Committee was content to permit the staff to proceed further. In particular, he asked Committee members to identify circumstances that would help the staff to identify performance conditions appropriately and to test examples against the model. The intention would be to present the results of this analysis to the July 2010 Committee meeting.
The Chairman promised the Committee that this step would not commit them to any particular course of action: he was asking members to consult within their organisations to help the staff prepare as complete an analysis as possible.
Review of Tentative Agenda Decisions published in January 2010 IFRIC Update
The Committee re-deliberated its tentative agenda decisions published in the March 2010 IFRIC Update.
IFRS 1 First-time Adoption of International Financial Reporting Standards – Accounting for costs included in self-constructed assets on transition
The Committee confirmed the tentative agenda decision published in the March 2010 IFRIC Update without any editorial changes.
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Reversal of disposal group impairment losses relating to goodwill
The Committee briefly discussed concerns expressed by the regulators that the agenda decision might lead to greater use of the reversal of impairment of goodwill as it indicated that the Standards are not clear. The regulators feared that such wording might lead to structuring. Nonetheless, the Committee confirmed the tentative agenda decision published in the March 2010 IFRIC Update without any editorial changes as it believed that it represents the current Standards.
IAS 26 Accounting and Reporting by Retirement Benefit Plans – Valuation of plan assets
The Committee confirmed the tentative agenda decision published in the March 2010 IFRIC Update without any editorial changes.
New Items for Consideration and Staff Recommendations for Tentative Agenda Decision
IAS 12 Income Taxes – Recognising deferred tax assets for unrealised losses on AFS debt securities
The Committee considered a request relating to how an entity determines, in accordance with IAS 12 Income Taxes, whether to recognise a deferred tax asset relating to unrealised losses on available-for-sale debt securities (AFS debt securities). The issue relates to the interpretation and application of IAS 12.24 and 29 and the recognition of deferred tax assets when there are insufficient taxable temporary differences available and the entity must consider tax planning opportunities available that will create taxable profit in appropriate periods.
The Committee agreed with the staff's analysis that the entity's ability and intent to hold the AFS debt securities until the unrealised loss reverses is not a 'tax planning opportunity' in accordance with IAS 12.29. Consequently, a deferred tax asset in relation to the deductible temporary difference at the reporting date may only be recognised in accordance with IAS 12.24 as part of a combined assessment with other temporary differences.
The Committee’s conclusion on this issue is consistent with the decision that the FASB reached under the AFI project on the same issue. As such, IFRSs and US GAAP should continue to be converged on this issue.
The Committee agreed to issue a tentative Agenda Decision reflecting their views.
IAS 27: Puts on Non-controlling Interest
The Committee started its discussion on the request for additional guidance how an entity should account for changes in carrying amount of financial liability for a put option, written to a non-controlling interest shareholder (NCI put), in the consolidated financial statement of a parent. The staff clarified that there is a potential conflict between IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement on one side and guidance in IAS 27 Consolidated and Separate Financial Statements on the other side.
As the IFRIC considered the issue in the connect of the pre-2008 amendments guidance in IAS 27 and IFRS 3, the Committee focused on the NCI puts arising after application fo the IAS 27 (2008) and IFRS 3 (2008).
During the discussion, a majority of the Committee members preliminary supported the view that changes in the carrying amount of the NCI puts should be recognised in profit or loss in accordance with IAS 39, whereas a minority of Committee members preferred to recognise them in equity (either as NCI or as a separate component of equity). The Committee members saw the issue as cash of two major concepts - the single economic entity concept and the derivatives theory. In their view reconciliation of these two issues was very difficult. Some Committee members supported their views by analogy to IFRS 3 and consistency with the treatment of put on majority interests. Others would distinguish between stand-alone put on NCI that are traded and the NCI puts that need to be settles on a gross basis.
The Committee members noted that there is diversity in practice related to this issue and referred to views expressed by some regulators. They also noted that several linked issues need to be addressed as part of this issue, in particular the question from which component of equity shall the entity reclassify the NCI put liability.
The staff also explained that the Financial Statements with Characteristics of Equity project was not likely to address the issue in their amendments to IAS 32.
Without reaching any consensus, the Committee decided to deliberate the issue further based on additional staff analysis. On that basis the Committee decided to add this project to its agenda. Several Committee members underlined that it would be very important to contain the scope of this project in order for the Committee to come to a consensus on a timely basis. The Chairman clarified that the project might lead to an interpretation or to an interpretation accompanied by a recommendation to the Board to propose amendments to the IFRSs. From a procedural standpoint, the latter would require a positive Board vote before being issued.
IAS 29: Reporting in Accordance with IFRSs after a Period of Chronic Hyperinflation
The Committee reviewed a staff analysis and recommendations relating to a request to clarify how an entity should resume presenting financial statements in accordance with IFRSs after a period of chronic hyperinflation when it was unable to comply with IAS 29 Financial Reporting in Hyperinflationary Economies. The situation is occurring currently in Zimbabwe, for which consumer price index information was not available from August 2008. The Zimbabwe currency was 'dollarised' in late January 2009 and companies were permitted to trade in foreign currencies from 2 February 2009, providing a 'hard currency' in which financial statements could be presented. However, it would be almost impossible to determine meaningful financial reporting information for the period during which CPI information was not available and, thus IAS 29 information could not be prepared.
The staff recommended that IAS 29 be amended and that the amendment should The staff think the amendment to IAS 29 should:
- (a) only be applied in the specific circumstances identified in the request.
- (b) provide guidance on the preparation and presentation of the opening statement of financial position on a fair value as deemed cost basis.
- (c) not provide additional guidance on comparative information.
- (d) clarify that this situation should not lead to an entity applying IFRS 1 in a subsequent reporting period.
In addition, the scope of IFRS 1 would be amended to exclude application of IFRS 1 in this specific situation.
A long and acrimonious debate followed. Some agreed with the staff recommendation, others disagreed, thinking that the issue was one of moving between IAS 29 and IAS 21; however, this did not address the issue of 'restarting' to prepare IFRS compliant financial statements after a period in which the entity could not do so. Some thought that given the Committee's decision on the repeat application of IFRS 1 (see AIP 2009-2011 cycle, below), that this had to be treated in a similar manner.
A Committee member brought the debate into focus by suggesting that the correct characterisation of the 'emerging from chronic hyperinflation' event was a 'fresh-start' event. The Committee paused while the staff considered this suggestion.
After this pause, the staff presented the following approach:
- IAS 29 would be amended to define/ identify chronic hyperinflation as a situation in which the general price index relating to the entity's functional currency is unavailable and the functional currency lacks exchangeability.
- Chronic hyperinflation would continue until the date on which the functional currency is once again freely exchangeable.
- The entity emerging from a period of chronic hyperinflation would be a 'new entity' and would measure its assets and liabilities on a 'fair value as deemed cost' basis on the date the functional currency became freely exchangeable. Equity would be restated as the residual net assets at that date.
- All IFRSs would be applied prospectively from the 'fresh start' date.
- Comparative figures in the first financial reporting period/ annual financial statements would not be presented (consistent with the 'new entity' view).
- The financial statements would be IFRS-compliant.
Committee members expressed qualified support, but thought that the approach would be workable and probably achieved the desired result of useful financial reporting for the entity. Disclosure of the events and circumstances that led to the fresh start would need to be disclosed. The staff will return with a thorough analysis of the issue at the July 2010 meeting.
IAS 39: Impairment of Financial Assets Reclassified from Available-for-Sale to Loans and Receivables
The Committee considered a request for additional guidance on how an entity should account for the impairment of financial assets with a fixed maturity after they have been reclassified from the available-for-sale (AFS) category to loans and receivables (IAS 39.50E, 50F and 54(a)).
Although the staff presented alternate views, the Committee agreed (with one exception) that the only tenable view was that:
- (a) the effective rate of interest is the rate that discounts the estimated future cash flows through the remaining life of the asset to the new carrying amount of the financial asset when it is reclassified (new effective rate of interest).
- (b) when recognising an impairment loss, all related OCI is reclassified from OCI to profit and loss.
- (c) after an impairment is recognised, the carrying amount of the financial asset is adjusted to be measured at the present value of estimated future cash flows, discounted at the new effective rate of interest.
The Committee agreed that the issue should not be added to the Agenda. The Agenda Decision would give a clear indication of the guidance in IAS 39, acknowledge that there might have been some divergence in practice historically, but that the Committee does not expect this to continue given the clear guidance identified.
Annual Improvements 2009-2011 Cycle
IFRS 1 First-time Adoption of International Financial Reporting Standards – Repeat application of IFRS 1
The Committee considered a request to clarify whether an entity can apply IFRS 1 First-time adoption of the IFRSs more than once in a situation that an entity previously applied IFRS 1 and reported in accordance with the IFRSs in order to comply with foreign listing requirements. Subsequently, the entity delisted and no longer presented its financial statements in accordance with IFRSs, reporting only in accordance with its national GAAP. As the reporting requirements in the entity's local jurisdiction change from national GAAP to IFRS, the entity is again required to present its financial statements in accordance with IFRSs.
The members of the Committee unanimously supported the possibility to apply the IFRS 1 requirements more than once. They argued that it may be difficult to resume presenting financial statements in accordance with IFRSs after a long period of time if IFRS 1 is not applied. In their opinion, the original intend of IFRS 1 was to apply IFRS 1 if and only if the most recent financial statements were not prepared in full compliance with IFRSs. Following a brief discussion, the Committee decided to propose an amendment that would require entities in that situation to apply IFRS 1.
Nonetheless, some Committee members were concerned about possible misuse and suggested tightening of wording of any amendment to avoid structuring. Some Committee members even suggested removing the reference to 'First-time adoption' and rather referring to 'Adoption of IFRSs'. Nonetheless, such a move was perceived being a too big change that would not be in scope of annual improvement process.
Some Committee members were concerned with the guidance provided in the IFRS for SMEs and suggested that the guidance in the IFRS for SMEs shall be amended. The Chairman noted that the Committee has no power to interpret IFRS for SMEs.
IFRS 1/IFRS 9 (Derecognition Chapter): Fixed Date in the Derecognition Exemption
The IFRIC continued its discussion of an exception that IFRS 1. provides from full retrospective application of the requirements for derecognition of financial assets and financial liabilities in IAS 39 for transactions before 1 January 2004. The issue was discussed initially in March 2010.
The Committee had great sympathy to move to a 'relative date' approach in IFRS 1, rather than the fixed date of 1 January 2004, such that IFRS 1 would refer to 'date of transition to IFRS'. However, it was acknowledged that it was unlikely that the change could be implemented in time for those entities adopting IFRS in 2010.
On a related matter, the Committee discussed whether a similar accommodation should be made to IFRS 1.D20 (Fair value measurement of financial assets or financial liabilities at initial recognition /'day 1 differences'), which permits entities to apply prospectively the provisions of AG76 and AG76A of IAS 39 Financial Instruments: Recognition and Measurement for transactions entered into after 25 October 2002, or 1 January 2004.
There was considerable disquiet about moving to a 'relative date' for such transactions-the Committee would be inviting structuring of transactions in anticipation of the move to IFRS in situations in which predecessor GAAP provided a 'more advantageous' financial reporting result. In addition, the Committee did not think it appropriate to write financial reporting standards in anticipation of an uncertain future event.
The Committee stressed that it and the IASB's derecognition team had to come to the same answer, and noted that the derecognition team was not in a position to inform the Committee on their position yet.
The Committee did not conclude on this issue and will await developments in the derecognition phase of the IASB's financial instruments project.
IAS 1: Comparative Information
The Committee re-discussed the issue of comparative information from the March meeting. The staff clarified that the Board at the March meeting decided to amend the exposure draft on Financial Statement Presentation (expected to be published later in May) to provide relief from the requirements that were seen as too onerous (for details please refer to the IAS Plus notes from the IASB meeting held on March 11, 2010).
After a brief discussion the IFRIC decided to propose the same amendments to IAS 1 as part of the annual improvement process based on the wording proposed by the Board in the Financial Statement Presentation project.
IAS 1: Going Concern Disclosure
The Committee considered a request a request on whether the disclosures required by IAS 1 Financial Statement Presentation on 'material uncertainties related to events or conditions that may cast a significant doubt upon the entity's ability to continue as a going concern' should be enhanced.
Committee members, especially those in public practice, noted that subtle differences in the manner in which similar requirements in International Auditing Standards and IFRSs were expressed had the potential for disclosures considered necessary by the auditor might be omitted by management yet the financial statements could still claim compliance with IFRSs.
In a short debate, the Committee noted the auditors' predicament, but thought that the principles in IAS 1 in general, and the requirements of IAS 1.25 in particular were sufficiently clear and that an Interpretation was not necessary, nor was this a topic that should be referred to the IASB for inclusion in the 2009-2011 cycle of Annual Improvements.
A tentative Agenda Decision will be published in the forthcoming IFRIC Update.
IAS 16: Clarification on Classification of Servicing Equipment as Inventory or Property, Plant, and Equipment
The Committee considered a request for improvement of IAS 16 Property, Plant and Equipment (PP&E) with respect to servicing equipment and classification as PP&E or inventory. The constituent referring the issue to the IASB had observed that of IAS 16.8 is unclear with respect to the classification of servicing equipment as PP&E or inventory. The confusion arises from a perceived contradiction in the way servicing equipment is addressed in the paragraph.
After a short debate, the Committee agreed to propose an Annual Improvement amendment to IAS 16.8 to state that 'major spare parts, stand-by equipment and servicing equipment' qualify as PP&E when they are expected to be used during more than one annual period. The amendment will also propose deleting the last sentence of the same paragraph.
IAS 23: Capitalisation of Borrowing Costs and First-time Adoption
The Committee discussed a request to clarify the interaction of IAS 23 Borrowing costs and IFRS 1 First-time adoption of IFRSs with respect to the borrowing costs that were capitalised in accordance with previous GAAP (when the previous GAAP was inconsistent with the IFRSs). The issue results from the revision of IAS 23 effective from 1 January 2009 that removed the option of expensing borrowing costs.
After a brief discussion the Committee decided to propose a clarification of IAS 23 that would allow grandfathering of the borrowing costs capitalised in accordance with the previous GAAP in the opening statement of financial position prepared in accordance with the IFRSs. The Committee also proposed to clarify the transition requirement for first time adopters and suggested that requirements IAS 23 should be applied after transition, regardless of the date capitalisation started.
Some Committee members suggested that first-time adopters should apply the requirements of their previous national GAAP also after transition when they started capitalisation before the date of transition. This proposal did not receive significant support as the Committee was concerned about comparability and consistency of the first IFRS financial statements.
IAS 32: Clarification of the Puttable Instruments Criteria for Income Trust Units
The Committee considered a request for clarification on guidance relating to the classification of puttable financial instruments (puts) that include contractual obligations to provide pro rata distributions. The request observed such obligations were often included within the terms of income trust units that are redeemable on demand by the holder. The obligation is frequently to distribute cash or additional trust units with a value equivalent to taxable income.
After a short debate the Committee agreed that this issue fell within the IASB's project on Financial Instruments with Characteristics of Equity, the exposure draft of which was due in May or early June 2010, with an expected implementation date of the final IFRS being 1 January 2012,
The Committee agreed with the staff recommendation that this not be added to the 2009-2011 cycle of Annual Improvements, subject to the agreement of the IASB.
IAS 40: Transfers from Investment Property
The Committee discussed the issue resulting from the annual improvements cycle 2008-2010 related to classification and measurement of an investment property when the management intends to sell the asset. At the March meeting, the Committee recommended the Board not to finalise the proposed amendment. The Board, at the March meeting discussed the issue and decided to refer the issue back to Committee for further deliberations as it believed the clarification was needed to address the issues identified. The committee will start deliberating the issue at its July meeting.
Administrative Session – IFRIC work in progress
The Committee received a report from the Interpretations Committee staff of issues received by the staff but not yet presented to the Committee. There was no discussion.
This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.
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