IFRS 3 — Regrouping and consistency of contingent consideration guidance

Date recorded:

The Committee reviewed a staff analysis that highlighted inconsistencies and potential conflicts between the IFRS 3 requirements on accounting for contingent consideration and other applicable IFRSs, and recommended that these inconsistencies be removed by deleting references to other IFRSs from the guidance on accounting for contingent consideration within IFRS 3.

Many Committee members supported the staff conclusions that it was desirable to remove inconsistencies and conflicts around contingent consideration and that IFRS 3 was the most logical place in which to house all the requirements. Those supporting the proposals thought that they were consistent with the intention of the IASB when it revised IFRS 3. However, some were concerned that the proposed changes could be more significant than would be within the scope of an ‘Improvement’.

A Committee member was concerned that the transition requirement was potentially troublesome as drafted and asked the staff to clarify what ‘prospective’ meant in this circumstance (i.e. business combination transactions involving contingent consideration or contingent consideration re-measurements).

Accepting the need for this clarification, the Chairman asked whether there was consensus that an Improvement to IFRS 3 should be proposed removing references to other IFRSs in IFRS 3 paragraph 58 and improving clarity in paragraph 40. The staff would map the changes against the Improvements Project criteria and report their findings to the Committee and the Board.

The Committee agreed to this approach (one member opposed).

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