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Review of Tentative Agenda Decisions Published in July 2010

Date recorded:

The Committee re-deliberated its tentative agenda decisions published in the July 2010 IFRIC Update.

IFRS 1 First-time Adoption of IFRSs - Repeat application of IFRS 1

The Committee confirmed the tentative agenda decision as exposed in the July 2010 IFRIC Update without any amendments.

IAS 12 Income Taxes - Recognition of deferred tax assets for unrealised losses on available-for-sale debt securities

Subsequent to the July 2010 meeting, the Committee received two further comment letters on the tentative agenda decision. The respondents were concerned that the July 2010 IFRIC Update did not consider the possibility of clarifying IAS 12 as part of the Annual Improvements process to address the issue. The Chairman recommended to the Committee not to finalise the agenda decision, but to allow the staff more time to provide an analysis of the concerns raised to enable the Committee to make a decision on the most appropriate way to address the issue. A Committee member asked whether there are any additional technical arguments to be considered following the staff's further work. The staff responded that their outreach activities would primarily focus on application guidance for practical issues.

Another Committee member expressed his disappointment with the length of time it is taking the Committee to finalise the agenda decision on a matter where the accounting literature seems to provide clear guidance on the treatment.

IAS 21 The Effects of Changes in Foreign Exchange Rates - Repayment of investments

The Committee spent some time considering the comment letters received on the tentative agenda decision exposed in the July 2010 IFRIC Update. Some Committee members had empathy with the concerns expressed in some of the comment letters and were of the opinion that the Committee gave up too quickly on providing guidance on the matter. The Committee continued to deliberate whether the cumulative translation reserve (CTA) should be recycled on an absolute reduction of ownership interest. One Committee member was deeply concerned about spending more time on a matter that the Committee cannot reach consensus on. Another Committee member was of the opposite view and recommended that the Committee continues its deliberations on the matter as this is a common problem experienced in practice and entities will go to extreme lengths to avoid recycling the CTA.

A Committee member asked the staff whether the Board has any intention to perform an overall review of IAS 21 in future. The staff responded that a review of IAS 21 is on the Board's radar but there will be no activity until post-2011.

A Committee member recalled that previous discussions of the Committee indicated that diversity in practice does not result from a relative reduction, but rather from an absolute reduction in ownership interest. Another Committee member responded that the issue is not about a reduction in ownership interest but rather on disposal and partial disposal of ownership interest. The Committee continued the discussion on absolute vs. relative reduction in ownership interest and how the payment of dividends can be seen as an absolute reduction which, given the current wording of the tentative agenda decision, will result in the recycling of the CTA to P&L.; A Committee member expressed his agreement with the tentative decision not to add the matter to the Committee's agenda, but as this is a very important issue, he recommends that it be addressed by the Board post-2011.

With only one Committee member objecting to finalising the revised tentative agenda decision as tabled by the staff, the Committee confirmed the decision.

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