Background

In its March 2023 meeting, the IFRS IC discussed a submission about how an entity accounts for homes and loans to buy homes provided to its employees. Two fact patterns have been submitted: employee home ownership plans and employee home loans. The IFRS IC concluded such fact patterns may not be widespread and the amount involved may not be material. Therefore, the IFRS IC did not recommend adding this matter to the standard-setting work plan and instead to publish an agenda decision. Seven comment letters were received and most of the respondents agreed with the IFRS IC’s conclusion.

Staff analysis

Five respondents agreed with the IFRS IC’s conclusion not to add a standard-project to the work plan but one respondent suggested that guidance would be helpful because such home and home loans to employees could have significant financial implications for both the entity and its employees. In addition, the two respondents who did not agree with the conclusion suggested agenda decision provide guidance to clarify how an entity accounts for the arrangements described.

The staff continued to consider that matters do not meet the ‘widespread and material’ criterion set out in paragraph 5.16(a) of the Due Process Handbook. In addition, it is not the IFRS IC’s role to provide explanatory materials when the matter does not meet the criterion, which was the precedent set in the agenda decision Non-Refundable Value added Tax on Lease Payments published in October 2021. 

The tentative agenda decision summarised the submission’s alternative views on the accounting for Fact Pattern 2, employee home loans. One respondent commented that presenting two views without explanatory material might imply that both views are acceptable and suggested the IFRS IC clarify whether the first view is acceptable. However, the IFRS IC did not perform technical analysis on the matter, and as such a clarification would amount to explanatory material. Accordingly, the IFRS IC should not clarify this and instead should remove both views from the agenda decision.

Staff recommendation

The staff recommended finalising the agenda decision with changes to the tentative agenda decision as suggested above.

IFRS IC discussion

All IFRS IC members who commented on the agenda decision agreed with the conclusion. One IFRS IC member agreed that adding explanatory material may carry the risk that an entity applies the accounting treatment in this over-simplified fact pattern to more complicated scenarios in real life. Moreover, some IFRS IC members expressed concerns that the matter is described as “not material” in the discussion and the conclusion of the agenda decision. Given this matter has a material effect in at least one jurisdiction (evidenced by the comment letters), they suggested to delete those words to avoid confusion. They considered that the words “not widespread” are sufficient and precise enough because these are the exact words in the Due Process Handbook which result in no further analysis to this matter. The IFRS IC agreed with this and only the term “not widespread” is retained.

IFRS IC decision

The IFRS IC, by a unanimous vote, decided to finalise the agenda decision with some edits suggested during the meeting.