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Administrative session

Date recorded:

The staff provided the Committee with an update on the current status of issues that are in progress but not to be discussed during the Committee’s November 2013 meeting. The Committee deferred work on four new issues and five outstanding issues. All such issues will be discussed at future meetings.

Work in progress that will be discussed at future meetings

  • IFRS 5 Non-current assets held for sale and discontinued operations: write down of a disposal group to the lower of its carrying amount and fair value less costs to sell (‘FVLCTS’) in accordance with IFRS 5 when the write-down exceeds the carrying amount of non-current assets in a disposal group.
  • IFRS 5 Non-current assets held for sale and discontinued operations: reversal of impairment losses relating to goodwill recognised for a disposal group classified as held for sale. The issue focuses specifically on whether an impairment loss relating to goodwill can be reversed.
  • IAS 12 Income taxes: clarification of the accounting for deferred tax assets where an entity:
    • has deductible temporary differences relating to unrealised losses on debt instruments that are classified as available-for-sale financials assets and measured at fair value;
    • not allowed to deduct unrealised losses for tax purposes;
    • has the ability and intention to hold the debt instruments until the unrealised loss reverses; and
    • has insufficient taxable temporary differences and no other probable taxable profits against which the entity can utilise those deductible temporary differences.
  • IAS 12 Income taxes: clarification of the calculation of deferred tax in circumstances in which the entity holds a subsidiary which has a single asset within it. Specifically, whether the tax base described in paragraph 11 of IAS 12 and used to calculate the deferred tax should be the tax base of the (single) asset within the entity which holds it, or the tax base of the shares of the entity holding the asset.
  • IAS 28 Investment in Associates and Joint Ventures: further analysis and discussion is needed before the Committee can propose to the IASB whether to amend or delete paragraph 31 of IAS 28, which is perceived as conflicting with the proposed amendments to IFRS 10 and IAS 28 (2011). Paragraph 31 of IAS 28 specifies that an investor recognises in full in profit or loss the portion of gain or loss on contribution relating to monetary or non-monetary assets received, if they are received in addition to receiving an equity interest in an associate or joint venture.

Issues on hold:

  • An IAS 39 Financial Instruments: Recognition and Measurement issue requesting clarification on how the income and expense that result from negative interest rates should be presented in the statement of comprehensive income. The issue arose from the fact that the demand of investors for ‘safe harbour’ assets has increased to a degree that the yield on some assets (on some of the remaining high quality government bonds) has turned negative. The staff have deferred finalisation of this issue pending the completion of the IASB’s financial instruments: classification and measurement project.
  • An IAS 2 Inventories issue requesting clarification on the accounting for long-term supply contracts of raw materials when the purchaser of the raw materials agrees to make prepayments to the supplier. The question is whether the purchaser/supplier should accrete interest on long-term prepayments by recognising interest income/expense, resulting in an increase of the cost of inventories/revenue. The Staff are reviewing this issue in the context of developments on the IASB’s revenue recognition project.

New Issues:

  • An IAS 12 Income taxes issue requesting clarification whether to apply IAS 12 and a “probable” threshold or the guidance in IAS 37 for contingent assets where an entity has paid cash to the tax authority but expects to recover some or all of that cash.
  • An IAS 37 Provisions, Contingent liabilities and Contingent Assets issue to clarify the measurement of a liability related to an emission trading scheme under IAS 37. Specifically, the submitter asks whether the guidance for the measurement of emission trading liabilities in IFRIC 3 Emission Rights, which was withdrawn in June 2005, is still an appropriate interpretation of IAS 37.
  • An IAS 32 Financial instruments: Presentation issue on classification of an instrument that is mandatorily converted, subject to a cap and floor. In the July 2013 meeting, the Committee asked staff to analyse the accounting for a financial instrument that is mandatorily convertible into a variable number of the issuer’s own equity instruments, subject to a cap and a floor on the number of equity instruments to be delivered. The Committee asked staff to analyse how the issuer of such an instrument should classify it in accordance with IAS 32. The Committee noted that this instrument is similar to the instrument described in Agenda Paper 17, but excludes the issuer’s option to settle early by delivering a fixed number of equity instruments.
  • An IFRS 3 Business Combinations issue requesting the Committee to clarify the interaction of the requirements in IFRS 3 Business Combinations for identifying an acquirer with the requirements in IFRS 10 Consolidated Financial Statements for preparing consolidated financial statements.

A Committee member raised concern on the IAS 12 question as the Committee were unable to resolve a similar issue.

Another Committee member asked if the new issue on IFRS 3 will be addressed in the January meeting. Staff said they will bring it as they have done much of the work.

Other administrative matters

No other matters were discussed.

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