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IFRS 11 — Remeasurement of previously held interests

Date recorded:

Agenda paper 6 — IFRS 11 Joint Arrangements — Remeasurement of previously held interests

The Project manager introduced the agenda paper. He said that the IFRS Interpretations Committee (the ‘Interpretations Committee’) received a request to clarify whether a previously held interest in the assets and liabilities of a joint operation should be remeasured to fair value when an investor that is not initially one of the joint operators acquires an  additional interest and becomes a joint operator. He said that the Interpretations Committee discussed this issue in its meeting in May 2015. It understood that there were different views on whether or not the previously held interests in the assets and liabilities of the joint operation should be remeasured and noted that some respondents to the outreach also highlighted other transactions involving previously held interests in which there were different views on whether such interests should be remeasured or not. The Interpretations Committee observed that it would be useful to analyse these other transactions simultaneously with the fact pattern submitted. He then indicated that Appendix A included a Matrix of transactions involving changes of interest in a business and guidance on the remeasurement of previously held/ retained interests. He said that the staff recommendation for the scope of the project was included in paragraph 34 of the agenda paper. The transactions proposed to be further analysed were:

  1. obtaining control of a joint operation either from having had joint control in a joint operation or being an investor but not an operator in a joint operation prior to the transaction;
  2. a loss of control resulting in the party having joint control in a joint operation or being an investor but not a joint operator in a joint operation subsequent to the transaction; and
  3. changes of interests while remaining an investor in a joint operation before and after the transaction.

He said that for the remaining transactions they did not identify that the transactions were common or widespread and accordingly would not be included in the project.

There was general support for the staff recommendation for the type of transactions to be included in the scope of the project. However, there were some concerns raised by several Interpretation Committee members.

One concern was related to the need to understand the interaction of this project with the equity method research project and the future PIR (post implementation review) of IFRS 11. It was mentioned that it would be important to keep in contact with the teams in those projects so as not to duplicate efforts.

Several Interpretation Committee members raised a concern that although the transactions included were clearly plausible, it would be important not to completely forget the transactions excluded because even though there were no concerns identified now, there could be in the future; particularly because IFRS 11 is a relatively new standard.

An additional concern was raised because some Interpretation Committee members would prefer to expand the scope to include transactions where the investee entities are not businesses.

The Chairman concluded that there was general support for the staff recommendation and the staff would consider the potential consequences on other transactions not originally included in the scope.

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