IFRS 10 / IFRS 11 - Transitional provisions: Impairment, foreign exchange and borrowing costs

Date recorded:

In January 2013, the Committee received a request to clarify the transition provisions of IFRS 10

Consolidated Financial Statements and IFRS 11 Joint Arrangements. The transition provisions of IFRS 10 and IFRS 11 provide relief from retrospective application in specific circumstances. However, IFRS 10 and IFRS 11 do not provide specific relief from retrospective application in respect of the application of IAS 36 Impairment of Assets, IAS 21 The Effects of Changes in Foreign Exchange Rates or IAS 23 Borrowing Costs. Retrospective application of these Standards could be problematic when first applying IFRS 10 and IFRS 11.

The Committee discussed the issue in its July 2013 meeting and noted that:

  1. if retrospective application of the requirements of IFRS 10 is impracticable because it is impracticable to apply retrospectively the requirements of other Standards, then IFRS 10 (paragraphs C4A and C5A) provides relief from retrospective application; and
  2. the only changes resulting from the initial application of IFRS 11 would typically be to change from proportional consolidation to equity accounting or from equity accounting to recognising a share of assets and a share of liabilities. In those situations, IFRS 11 already provides relief from retrospective application. Consequently, the initial application of IFRS 11 should not raise issues in respect of the application of other Standards in most cases.

On the basis of the analysis above, the Committee tentatively decided not to add this issue to its agenda.

Staff presented analysis of comment letters received to the Committee and recommended that the Committee should not add this issue to its agenda and presented the final agenda decision wording.  

A member raised concern on the sentence in the agenda decision “The Interpretations Committee also noted that within the context of assessing control, the relevant activities of investees under IFRS 10 would be largely the same as significant financial and operating policies under IAS 27 Consolidated and Separate Financial Statements (2008).” The member explained that IAS 27 and IFRS 10 are not the same and this sentence should not be included. Staff agreed to take this sentence out.

Another member was concerned with the use of “impracticable”. In his opinion this word meant impossible and not capable of completing with human resources. Another member added that in practice, “impracticable” has been applied narrowly however this does raise the question that in practice “impracticable” can be interpreted differently.

The Chairman concluded that apart from the sentence discussed above the Committee agreed with the wording in the final agenda decision.

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