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Maintenance and consistent application

Date recorded:

Non-refundable Value Added Tax on Lease Payments (IFRS 16)—Finalisation of Agenda Decision (Agenda Paper 12A)

At its September 2021 meeting, the IFRS Interpretations Committee (Committee) decided not to add a standard-setting project to the work plan in response to a submission on IFRS 16. The Committee instead decided to finalise an agenda decision explaining that it has not received evidence that the matter has widespread effect and has, or is expected to have, a material effect on those affected.

The purpose of this session was to ask Board members whether they object to the agenda decision.

Board discussion

One Board member asked why there was no explanation of the relevant accounting treatment in the agenda decision, and instead the agenda decision simply notes that the matter is not widespread and therefore it would not be taken onto the Committee’s agenda. The staff replied that an explanation of the relevant accounting treatment would only be added if the reason for not adding the matter to the Committee’s agenda was that the accounting requirements are clear. In that case, an agenda decision sets out those requirements. However, if something is not taken on the agenda because it is not widespread, there would be no explanation of the accounting requirements.

No Board member objected to the publication of the agenda decision.

Accounting for Warrants that are Classified as Financial Liabilities on Initial Recognition (IAS 32)—Finalisation of Agenda Decision (Agenda Paper 12B)

At its September 2021 meeting, the Committee decided not to add a standard-setting project to the work plan in response to a submission about whether, applying IAS 32, an issuer reclassifies a derivative financial liability to equity after initial recognition in particular circumstances. The Committee instead decided to finalise an agenda decision

The purpose of this session was to ask Board members whether they object to the agenda decision.

Board discussion

Similar to the previous discussion, the Chairman raised the question about the helpfulness of the agenda decision. The agenda decision notes that there is an ongoing project whose scope would cover the query but does not offer any explanation as to the accounting treatment. The Vice Chair responded that it was a very specific fact pattern and answering those could have consequences for other fact patterns which have not been discussed.

No Board member objected to the publication of the agenda decision.

Supplier Finance Arrangements—Sweep issue (Agenda Paper 12C)

Background

In July 2021, the Board gave staff permission to begin the balloting process for the Exposure Draft (ED) Supplier Finance Arrangements, which proposes to amend IAS 7 and IFRS 7.

At its June 2021 meeting, the Board tentatively decided on the package of disclosure objectives and requirements that it would propose to add to IAS 7 and IFRS 7.

The purpose of this session was to consider the following sweep issue that has arisen during the drafting of the proposed amendments.

The proposed amendments to IAS 7 include a requirement for an entity to disclose, as at the beginning and end of the reporting period, the carrying amount of financial liabilities that are part of a supplier finance arrangement. If an entity does not present separately in its statement of financial position financial liabilities that are part of a supplier finance arrangement—for example, it presents those liabilities within ‘trade and other payables’ or ‘other financial liabilities’—users of financial statements may find it difficult to assess the effects of the arrangement on the entity’s liabilities and cash flows.

Staff recommendation

The staff recommended that the Board add a requirement for an entity to disclose, as at the beginning and end of the reporting period, the line item(s) in the statement of financial position in which the entity presents the carrying amount of financial liabilities that are part of a supplier finance arrangement.

Board discussion

There was some discussion about the costs of the additional requirement and the associated benefits. Although the additional requirement would incur significant cost, Board members seemed to agree that the benefit outweighs that cost.

Board decision

All Board members voted in favour of the staff recommendation.

IFRIC Update September 2021 (Agenda Paper 12D)

The staff asked the Board whether they have any comments or questions on the September 2021 IFRIC Update.

There was no discussion on this paper.

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