Consolidation and joint arrangements – Effective dates and transition

Date recorded:

Effective date and early application of forthcoming IFRS 10, IFRS 11, IFRS 12, IAS 27 (revised 2011) and IAS 28 (revised 2011)

The IASB is finalising drafting of the pending standards IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Involvement with Other Entities, IAS 28 (revised) Investments in Associates and IAS 27 (revised) Separate Financial Statements. However, the IASB had delayed discussion on effective date for the five pending standards until the comment period on the Request for Views Effective Date and Transition Methods closed on 31 January 2011.

The preliminary summary of the feedback received in the request for views was that consolidation and joint ventures would generally not represent a significant cost to implement, except for those in the energy, financial services and asset management industries. Respondents also generally supported linking the five standards so that their effective dates were synchronised. Respondents also generally supported permitting early application and requiring limited retrospective application in accordance with IAS 8.

Based on the feedback received in the request for views and the fact that the consolidation and disclosures standards were driven by the financial crisis at the request of the G20, the staff recommended an effective date of 1 January 2013 with early application permitted provided that all of the five standards were also early applied (with an exception for the disclosure requirements in IFRS 12) and require limited retrospective application in accordance with IAS 8 for IFRS 10 and IFRS 11.

Several Board members asked the staff about the related project on consolidation for investment companies. They stated their support for including the effective date of that potential standard at the same time as the other five related projects rather than having one year of one approach and another approach applied the following year. The staff mentioned their intention is for the exposure draft on investment companies to be issued in April with redeliberations beginning during the summer. They felt that it is possible that a final standard could be issued during 2011 giving entities at least one year to prepare for adoption.

One Board member questioned the staff's proposal that would allow for any of the disclosures required under IFRS 12 to be included in financial statements prior to the effective date. He specifically asked about the inconsistency as some of the disclosure requirements in IFRS 12 use terminology included in the new standards (e.g., joint arrangements). The staff clarified their intention is that, in accordance with IAS 1, entities would be permitted to disclose additional information above those required. They were concerned that not including specific language to that effect may result in entities believing they were prohibited from including those disclosures unless all the other four standards were also early adopted. They also clarified that any or all of the IFRS 12 disclosures could be provided prior to adoption of all five standards.

The Board unanimously agreed to require an effective date of 1 January 2013 with early application permitted if all five standards are early adopted and limited retrospective application. The staff also mentioned they would post to the IASB website a "not before date" of when the five standards will be issued to assist companies with their IAS 8 disclosures, but the intention is that they would be issued in early March.

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