IFRS implementation issues — IFRIC update

Date recorded:

Agenda paper summary

The regular update summary paper on the most recent IFRS Interpretations Committee meeting was made available

IFRS 2 (ED/2014/5) Classification and Measurement of Share-based Payment Transactions

The IASB was asked whether it agreed with the recommendation of the Interpretations Committee to finalise the three proposed amendments to IFRS 2 (subject to some clarifications and wording revisions) and whether it agreed with the revisions suggested by the Committee to the proposed amendments.

The ED contained proposals to address three issues and the Committee had provided the following recommendations thereto (based on its discussions and responses received relating to the ED) and to the related transition guidance (see Agenda Paper 12A) to the IASB on each of the issues (discussed separately below).

The Committee also provided the IASB with suggested wording changes to illustrate its suggested revisions (see Agenda Paper 12B) and requested the IASB to comment thereon.

  1. The effects of vesting conditions on the measurement of cash-settled share-based payments

    The wording should be clarified to ensure that all vesting conditions are considered and that the amendments are applied to all cash-settled awards.

    Any new accounting would should apply to modifications that occur after the first date amendments are applied.

    IASB discussion and decision

    The IASB agreed with the recommendation and proposed wording.

  2. The classification of share-based payment transactions with net settlement features

    The scope exception (requiring share-based payment transactions with net settlement features to be classified as equity-settled in its entirety) should be retained and an illustrative example should be added. Further clarification should be provided relating to the difference between compensation costs and the cash paid (and expected to be paid) to the tax authority and the treatment if a higher number of equity instruments than required had been withheld by an entity.

    Any reclassification to equity should be recognised at the beginning of the annual period in which the amendment is first applied.

    IASB discussion and decision

    After a lively discussion the IASB agreed with the recommendation but suggested that the proposed wording be amended.

    A number of members were concerned that the proposed paragraph 51 (c) would lead to additional mandatory disclosure (of the estimated amount of cash an entity will pay relating to withholding tax on behalf of the employee), as paragraph 51 refers to the need to disclose ‘at least the following’. A few alternatives were discussed about how to address this potential issue including addressing the problem as part of the materiality project or the disclosure initiative and including guidance that would promote rather than require the disclosure.

    Ultimately, the IASB decided to include the proposed guidance as part of paragraph 52, where its inclusion would not lead to a mandatory disclosure requirement, but rather they thought that this would mean that the entity would need to determine the materiality of the effect of the transaction and decide whether disclosure should be made.

    In addition, one member was concerned that the proposed paragraph 33H provided prescriptive accounting treatments (on how to account for situations when too many equity instruments had been withheld by the entity) and should be re-drafted to provide guidance rather than to detail accounting mechanics. The other members agreed.

  3. The accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

    An example illustrating the issue should be added in addition to specifying why the difference between the liability derecognised and equity recorded is recognised in profit or loss.

    The carrying amount of a related liability should be adjusted on the date the amendment is first applied with the effect to retained earnings from the beginning of period in which the amendment is first applied.

    IASB discussion and decision

    During the discussion it was proposed not to add anything to the standard. The reasoning behind this was that a similar issue (expressed using wording similar to that used in the proposed amendment) already exists within the standard. No guidance had been provided in relation to that issue and therefore, for consistency, no guidance should be provided in this instance.

Deferral of the effective date of the September 2014 Amendment to IFRS 10 and IAS 28

The September 2014 Amendment to IFRS 10 and IAS 28 relates to Sale or Contribution of Assets or Joint Ventures.

The IASB was asked whether they agree with the staff’s recommendations relating to finalising the deferral. 

A number of courses of action were raised based on responses to the ED (see Agenda Paper 12C). A majority of respondents (and, based on their analysis, the staff) support the proposal to defer the effective date. A few respondents are of the opinion that the proposal should be withdrawn and others feel that the effective date should not be deferred.

IASB discussion and decision

After some discussion surrounding the potential impact of the recommendation on certain jurisdictions, the IASB agreed with the recommendation. Therefore, the staff will prepare for balloting the amendment deferring the effective date.

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