Annual Improvements 2008-2010

Date recorded:

The IASB deliberated the IFRIC's recommendations on the annual improvements project issues the IFRIC discussed at its Meeting in January 2010.


IFRS 1 - Fair value or revaluation as deemed cost exemption

The Board deliberated whether to require that any adjustments resulting from an event-driven revaluation after the date of the transition to IFRSs (but during the period covered by the first IFRS financial statements) be recognised in retained earnings or allow recognition in another category of equity, if deemed appropriate. The Board confirmed that allowing recognition in another category of equity in certain circumstances is consistent with the general guidance in IFRS 1 relating to transition adjustments.

The Board also confirmed the amendment to the effective date paragraph to clarify that entities that applied IFRS 1 in a previous period are permitted to apply the amendment to paragraph D8 retrospectively in the first annual period after the amendment is effective.


IFRS 3 - Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS 3

The Board confirmed the proposed amendment to clarify that for existing users of IFRSs, the financial instrument standards do not apply to contingent consideration arising from a business combination for which the acquisition date preceded the application of IFRS 3 (2008). Without much deliberation, the Board further agreed to delete the reference to IFRS 3 (2004) and to reproduce those requirements within the transition section of IFRS 3 (2008).


IFRS 3 - Measurement of non-controlling interests

The Board discussed the clarification that the choice for measuring the non-controlling interest (NCI) in an acquiree applies only to 'components of non-controlling interest that are present ownership instruments and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation'. Without discussing the matter, the Board confirmed the proposed clarification and agreed that other present ownership instruments that are classified as NCI should be measured at fair value unless another measurement basis is required by IFRSs.


IFRS 7 - Clarification of disclosures on the nature and extent of risk arising from financial instruments

The Board confirmed the IFRIC's recommendation to include a paragraph to emphasise the interaction between qualitative and quantitative disclosures and how it contributes to the disclosure of information in a way that enables users to evaluate an entity's exposures to risks.

The Board's discussion then focused on the credit risk disclosures and the proposal to remove the requirements to disclose the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated (par 36(d) of IFRS 7).

Two Board members were opposed to the immediate deletion of the requirement, as the information is very useful for analysts and investors, albeit that it was worded poorly. Those Board members requested the deferral of the decision to delete the requirement and explore possibilities of improving the wording as part of the Impairment or Derecognition projects.

Other Board members did not agree and when put to a vote, the majority of members supported the proposed deletion.


IAS 28 - Partial use of fair value for measurement of associates

The Board confirmed the IFRIC's recommendation to amend IAS 28 in order to clarify that different measurement bases can be applied to portions of an investment in an associate when part of the investment is designated at initial recognition to be measured at fair value through profit or loss in accordance with the scope exclusion in IAS 28. One Board member questioned whether the consequences of subsequent measurement resulting from the proposed amendment have been thought through and noted that it may lead to opportunities for earnings management. Some other Board members had similar concerns but agreed that those concerns do not stem from this proposed amendment and should be addressed somewhere else.

The Board also agreed to include minor modifications to clarify that an entity first determines whether it has significant influence over an entity in accordance with the requirements of IAS 28. Only after significant influence has been evidenced does an entity measures the portion of the investment to which the scope exemption applies at fair value. The remaining interest in the associate should be accounted for using the equity method.


IAS 34 – Significant events and transactions

Without much deliberation the Board confirmed the proposed amendment to emphasise the existing disclosure requirements in IAS 34 and to add guidance to illustrate how those requirements should be applied. The Board also agreed to include an explanation in the Basis for Conclusions setting out the reasons for the removal of paragraph 18 of the current Standard dealing with disclosures required when the interim financial report only includes condensed financial statements.

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