IFRS Interpretations Committee update

Date recorded:

The staff provided an update on two issues that the Committee discussed at their November meeting:

  • IFRS 2 Share-based Payment — Vesting and non-vesting conditions
  • IAS 32 Financial Instruments: Presentation — Put options written over non-controlling interests.


Vesting and non-vesting conditions

With regards to the issue related to vesting and non-vesting conditions under IFRS 2, there are six issues that have been currently considered by the Committee. The staff noted that the Committee had taken the Board's suggestion from the September meeting and decided to address four out of six issues through the annual improvements process (1, 2, 3 and 6) and the rest through an agenda request to the IASB for a separate amendment project to IFRS 2 (issues 4 and 5). The Board agreed with that decision.

Put options written over non-controlling interests

In regards to the second issue on changes in carrying amount for financial liabilities recorded for put options written over non-controlling interests under IAS 32, the staff noted that at its November meeting, the Committee discussed its tentative agenda decision made in September that the IASB should address this issue as part of the financial instruments with characteristics of equity (FICE) project. The staff noted that a significant number of comment letters were received on the agenda decision; mainly two types of concerns were expressed. The first type was about the existing conflict between standards and the second one was how to enforce the tentative decision. Regulators were particularly concerned about significant diversity in practice and questioned whether the Committee's tentative agenda decision was the right way to address this issue.

In light of the significant number of comments received and the Boards' decision to defer the FICE project, the staff said that the Committee was looking for direction from the Board how best to address these issues. In particular, the Committee was interested in whether the Board would consider making an amendment to the scope of IAS 32 as opposed to the Committee providing an interpretation on this issue. The staff noted that the Committee proposed that it would continue to work on this issue with the FICE team to come up with an improved solution to financial reporting that is directionally in line with any guidance developed through the FICE project.

One Board member thought that IAS 32 was clear that the put options written over non-controlling interest are classified as a gross liability. The staff pointed out that concerns were that the changes in the carrying amount of gross liabilities are recognised through profit and loss, thus contributing to volatility. This also contradicts IAS 27, under which transactions between equity owners should not have an impact on profit and loss.

The Board agreed with the Committee's suggestion to work on improving the guidance in this area together with the FICE team.

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