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IFRS implementation issues

Date recorded:

The Director of Implementation Activities introduced the session and brought two items in the IFRS Interpretations Committee’s (“Interpretations Committee”) May 2015 Update to the attention of the IASB members.

Firstly, he highlighted the item relating to IFRS 5 and noted that the Interpretations Committee had discussed a number of issues relating to IFRS 5, noting that there were eleven issues in total, and that the staff was planning to bring to the IASB in July, a paper providing an overview of the various issues in order to seek the IASB’s guidance on how the Interpretations Committee should proceed with the issues given that a number of the Interpretations Committee’s discussions on these issues had not lead to a conclusion as to what the answer should be.

Secondly, he highlighted the IAS 16 item, with respect to accounting for net proceeds received during the testing phase of the construction of an item of property, plant and equipment.  He noted that the Interpretations Committee had discussed this item on several occasions and some concerns had been identified, with the amount of proceeds deducted in some circumstances being quite material, and so the Interpretations Committee had tentatively decided to develop an Interpretation on this matter, with the focus on whether greater understanding can be given to the meaning of “testing” and in particular, the meaning of “functioning properly” in IAS 16.  He noted that once the Interpretations Committee had reached general agreement on this, they would bring a paper to the IASB setting out the technical conclusions and asking for the IASB’s formal input.

DRAFT INTERPRETATION OF IAS 21 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES – FOREIGN CURRENCY TRANSACTIONS AND ADVANCE CONSIDERATION - Summary of due process followed and technical matters agreed by the IFRS Interpretations Committee

A submission was received by the Interpretations Committee asking how to determine which exchange rate to use when reporting revenue transactions denominated in a foreign currency in accordance with IAS 21.  In particular, the submission described a situation in which the customer paid for the goods or services in advance.  The Interpretations Committee performed outreach, observing that the issue affected a number of jurisdictions and that there was diversity in practice between recognising revenue using the spot exchange rate at the date of receipt of the non-refundable advance payment and the spot exchange rate at the date of the transfer of goods or services, and that diversity was expected to continue under IFRS 15.  Accordingly, the Interpretations Committee developed an Interpretation about which exchange rate to use when reporting foreign currency transactions in circumstances in which there was advance consideration.

The Technical Manager introduced the agenda paper, provided an overview of the Interpretation and asked the IASB members:

a) whether any members intended to object to the release of the draft Interpretation during the future balloting process;

b) whether they were satisfied that all required due process steps to date that related to the development and publication of the draft Interpretation had been complied with;

c) whether they agreed with a comment period of no less than 90 days (a normal period for a draft Interpretation); and

d) whether they gave the staff permission to ballot the draft Interpretation

All fourteen IASB members confirmed that they were satisfied that all due process requirements had been complied with, that they agreed with a comment period of no less than 90 days, and gave the staff permission to ballot the draft Interpretation.  No IASB members indicated that they intended to object to the release of the draft Interpretation.

NARROW-SCOPE AMENDMENT:  IAS 12 INCOME TAXES – RECOGNITION OF DEFERRED TAX ASSETS FOR UNREALISED LOSSES – Summary of the Interpretations Committee’s recommendations

The Exposure Draft (“ED”) Recognition of Deferred Tax Assets for Unrealised Losses (ED/2014/3) was published in August 2014, and contained a proposal to amend IAS 12 to clarify the guidance on recognition of a deferred tax asset that was related to a debt instrument measured at fair value.  At its March 2015 meeting, the Interpretations Committee discussed the comments received on the ED, and agreed to recommend that the IASB should proceed to finalise the proposed amendment; however, some Interpretations Committee members expressed specific concerns about the proposed amendments that they believed should be addressed when finalising the amendments.

The Technical Manager introduced the agenda paper, provided an overview of the proposed amendment, and asked the IASB members:

a) whether they agreed with the recommended revisions to the proposed amendment to IAS 12; and

b) whether they agreed with the Interpretations Committee’s recommendations about proceeding with the amendment to clarify the guidance on recognition of a deferred tax asset that is related to a debt instrument measured at fair value.

All fourteen IASB members confirmed that they agreed with the recommended revisions to the proposed amendment and with the Interpretations Committee’s recommendations about proceeding with the amendment.

NARROW-SCOPE AMENDMENT:  IFRS 8 OPERATING SEGMENTS – CLARIFICATIONS ARISING FROM THE POST-IMPLEMENTATION REVIEW - Summary of due process

The purpose of this agenda paper was to explain the due process steps that the IASB had taken before publication of the Exposure Draft Clarifications arising from the Post-implementation Review (Proposed amendments to IFRS 8 Operating Segments) and to ask the IASB members whether they believed that the proposed amendment had been subject to adequate due process.

The Senior Technical Manager introduced the agenda paper, and asked the IASB members:

a) whether any members intended to dissent from any of the proposed amendment;

b) whether they agreed with the staff recommendation that the proposals should be applied retrospectively, and that earlier application should be permitted;

c) whether they agreed that no specific additional relief was required for first-time adoption;

d) whether they were satisfied that all due process steps required to date had been complied with; and

e) whether they gave the staff permission to start the balloting process

An IASB member noted that in the May 2015 meeting the IASB had tentatively decided, with respect to the proposed amendment that an entity should provide restated comparative period information in its first interim reporting following a reorganisation, that if an entity presented more than one comparative period, it only needed to restate one comparative period.  She noted that she would dissent based on this point, noting that, although IFRS only required one comparative period, there were circumstances where entities prepared more than one comparative period for regulatory purposes or because the entity chose to present more than one comparative period, and noted that she did not believe the IASB should be stepping in and proving relief from providing comparative information for all comparative periods, except in exceptional circumstances. 

Another IASB member noted that the proposed amendment in paragraph 9(f) of the agenda paper – to require entities to explain the nature of reconciling and unallocated items more fully in the reconciliations than is currently required by the Standard – was not very specific, and questioned how this would translate into requirements.  The Senior Technical Manager responded, noting that the staff would need to look at the wording on this, but noted that it would be a discussion about what the nature of the items was, and what they represented; noting that the objective was to enable investors to allocate reconciling items to individual business segments if they felt that was appropriate.

All fourteen IASB members agreed with the staff recommendations that the proposals should be applied retrospectively, and that earlier application should be permitted; and that no specific additional relief was required for first-time adoption.  All fourteen IASB members confirmed that they were satisfied that all due process steps required to date had been complied with; and gave their permission to start the balloting process.

One of the fourteen IASB members indicated an intention to dissent from the proposed amendment.

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