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Annual Improvements (2012-2014 cycle)

Date recorded:

The Technical Manager outlined that the objective of the session was to present Board member with the final recommendation from the IFRS Interpretations Committee based on their analysis of the comment letters received on the five proposed annual improvements. The Board would be required to approve of the suggested changes and agree whether due process was complied with for each topic so that Staff could proceed with the final balloting. Agenda paper 13F included the final wording for the amendments.

 

Issue 1 – Non-current Assets Held for Sale and Discontinued Operations—Changes in methods of disposal

The Interpretations Committee recommended that the IASB finalise the proposed amendments to IFRS 5, but to also add further clarifications suggested by constituents. According to these clarifications

  • change from held for sale to held for distribution (or vice versa) would not change the 'date of classification' and should not be considered to be an event or circumstance that may extend the period to complete a sale or distribution, respectively;
  • the value of the asset (or disposal group) would be updated if an entity reclassified an asset (or disposal group) directly from being held for sale to held for distribution (or vice versa) and any impairment loss or subsequent reversal would be recognised; and
  • a 'direct reclassification' meant that an entity moved the disposal group from one method of disposal to another without any time lag, such that there would be no interruption of the application of the IFRS 5 requirements in; judgement might be required to determine if there was a 'direct reclassification'.

The Technical Manager asked whether Board members had any questions. No comments were raised, and all Board members approved the staff recommendations.

 

Issue 2 – IFRS 7 Financial Instruments: Disclosures—Servicing Contracts

The Project Manager introduced the paper. The Interpretations Committee recommended finalising the proposed amendment to IFRS 7 to clarify how an entity should apply the guidance in IFRS 7 to a servicing contract when assessing whether a servicing contract was continuing involvement for the purposes of applying the transfer disclosure requirements. However, the Committee recommended:

  • to delete the presumption that the right to earn a fee for servicing the financial asset was generally continuing involvement for the purposes of the transfer disclosures; and;
  • to clarify that the term ‘continuing involvement’ in IFRS 7 was used in a different way from that term in IFRS 9 (or IAS 39) in the Basis for Conclusions to IFRS 7.

One Board member indicated that he believed that continuing involvement should include fixed and variable fees, otherwise it is possible to provide structuring opportunities. Several Board members disagreed because the purpose of the project was to capture situations when an entity was still exposed to risk after having sold an asset and there were fees related to the performance of the asset. The standard would capture cases that were structured as fixed fees although they operated as variable fees. Any other fees should be rare, for instance fees to get paid irrespective of the performance of the asset.

A majority of 15 Board members approved the staff recommendation.

 

Issue 3 – IFRS 7 Financial Instruments: Disclosure—Applicability of the Amendments to IFRS 7 to interim financial statements

On this issue the IFRS Interpretations Committee recommended that the IASB finalise the proposed amendment to paragraph 44R of IFRS 7 as exposed. It also recommended to delete the last sentence of paragraph BC7 of the ED as it was not necessary and could be read as implying a level of disclosure almost as extensive as that required in annual IFRS financial statements.

No comments were raised by the Board. The Board approved both recommendations. On the second issue Board members felt that paragraph BC7 of the ED was redundant anyway since they believed that it was already in IAS 34.

 

Issue 4 – IAS 19 Employee Benefits—Discount rate: regional market issue

The Technical Manager reported that the Committee’s recommendation on this issue was to finalise the proposed amendment to IAS 19 as proposed and without performing further analysis on this issue.

No comments were raised by the Board, and all Board members approved the staff recommendation.

 

Issue 5 – IAS 34 Interim Financial Reporting—Disclosure of information 'elsewhere in the interim financial report'

On the last issue, the IFRS Interpretations Committee recommended that the IASB finalise the proposed amendment to IAS 34 by adding some further clarifications, namely:

  • the amendment was not extending the scope of the interim financial report, and
  • disclosures incorporated by cross-reference should be made available 'on the same terms' as in the financial statements.

No comments were raised by the Board, and all Board members approved the staff recommendation.

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