Date recorded:

The IFRS Interpretations Committee (Committee) meets on Tuesday 14 & Wednesday 15 June 2021.

The Committee will discuss the comment letter analyses for two tentative agenda decisions, input on a Board project and two initial considerations.

Comments on tentative agenda decisions

IFRS 16 Leases—Non-refundable VAT on Lease Payments: In March 2021, the Committee discussed a submission about whether a lessee includes non-refundable VAT as part of the lease payments. In the meeting, the Committee members generally agreed with the accounting conclusion but a number of them were not convinced that the matter is not material or widespread based on the limited outreach performed by the staff. The responses from the comment letters reflect similar views and some respondents requested explaining the accounting treatment of the non-refundable VAT in the agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are initially classified as Liabilities: In March 2021, the Committee discussed a submission asking whether the issuer reclassifies the warrant (which is classified as a financial liability at initial recognition) as equity when the exercise price is subsequently fixed. The staff concluded that the matter, in isolation, is too narrow to be answered and recommended publishing a tentative agenda decision to explain this. On the other hand, they believe that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s Financial Instruments with Characteristics of Equity (FICE) project. In the meeting, the Committee members generally agreed with the staff's recommendations as did most respondents to the tentative agenda decision.

The staff recommend that the tentative agenda decisions be finalised with minor editorial changes or no change at all.

Input on Board project

Proposed amendments to IFRS 16 LeasesLease Liability in a Sale and Leaseback: In November 2020, the Board published ED/2020/4 Lease liability in a Sale and Leaseback, which proposed an amendment to IFRS 16. The comment period ended in March 2021 and the Board discussed the feedback on the ED at its meeting. The staff analysed the feedback and provided recommendations on the project direction in the agenda paper.

The staff are seeking Committee members' views on the possible project direction.

Initial consideration

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: The Committee received a submission asking whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents ("C&CE"). The terms and conditions of the demand deposit do not prevent the entity from accessing amounts held in the demand deposit but the entity cannot use the cash other than the purpose specified in the agreement. The staff analysed that such demand deposits should be included in C&CE in the statement of cash flows and could be presented as C&CE in the statement of financial position, unless presenting it separately in an additional line item is relevant to an understanding of the entity's financial position. The information about the restrictions is required to be disclosed under various IFRS Standards.

The staff recommended not to add a standard-setting project and instead publish a tentative agenda decision on this issue.

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: The Committee received a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on transfer initiation date, rather than the transfer settlement date. The staff concluded that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account.

The staff recommended not to add a standard-setting project and instead publish a tentative agenda decision on this issue.

Work in progress: The staff are in the process of analysing three matters:

  • Principal versus agent-IT resellers (IFRS 15)
  • Deficits in low/new energy vehicle credits (IAS 37)
  • Rent Concessions-lessors and lessees (IFRS 16 and IFRS 9)

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