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IFRS 10/IAS 27 — Sale or contribution of assets between an investor and its associate or joint venture

Date recorded:

The project manager explained that paper 12AA gives an overview of the comment letters received. The staff asked the IASB if, based on the comment letters, they wish to finalise the amendments. The project manager summarised the proposed amendments of the Exposure Draft.

The project manager pointed out that the IFRS IC has recommended proceeding with the finalisation of the proposed amendments and recommended amending paragraph B99A in the Exposure Draft to clarify the following:

  • Not only a sale or contribution of a subsidiary is covered but any event in which control over the subsidiary is lost to minimise structuring opportunities.
  • The gain or loss from the loss of control of a subsidiary includes any reclassification adjustment.
  • The requirements for partial recognition of gains or losses from loss of control of a subsidiary only apply when the investment is accounted for under the equity method.

Furthermore, the IC recommended early application and prospective application for first-time adopters.

One Board member pointed out that some respondents to the ED wished for the same accounting treatment regardless of whether the subsidiary constitutes a business or not.

The project manager confirmed this but said that it is very difficult to implement this approach because there are other issues than equity method accounting that should be included in this project.

The Board member replied that he is worried that this short-term solution might be reversed when the IASB starts a comprehensive project on the equity method and the impact this could have on the market.

The director of implementation activities replied that IAS 28 will remain in its current state for a while and therefore recommends to follow the IFRS IC’s recommendation to finalise.

Two Board members mentioned that it is consistent with the consolidation requirements to eliminate gains or losses on transactions within one group.

One Board member asked for the benefits of the project other than to eliminate diversity in practice.

The implementation director replied that there is a contradiction between two standards that needs to be eliminated.

Upon inquiry of one Board member it was clarified that there is a project for a comprehensive review of the equity method on the research agenda and that a project manager is allocated to it but that it will take considerable time until a discussion paper will be issued.

After taking a vote, 14 Board members supported the recommendation to finalise the project.

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