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Two new EFRAG draft comment letters published

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

29 Jan 2013

The European Financial Reporting Advisory Group (EFRAG) has issued draft comment letters on two IASB Exposure Drafts: ED/2012/7 'Acquisition of an Interest in a Joint Operation' and ED/2013/1 'Recoverable Amount Disclosures for Non-Financial Assets (Proposed Amendments to IAS 36)'.

IASB ED/2012/7

This Exposure Draft, issued by the IASB on 13 December 2012, proposes to amend IFRS 11 Joint Arrangements to clarify that a joint operator accounts for the acquisition of an interest in a joint operation which is a business by applying IFRS 3 Business Combinations and other relevant standards.

EFRAG supports the amendments to IFRS 11 because they addresses diversity in the practice of accounting for acquisitions of interests in a joint operation whose activities constitute a business. However, EFRAG is concerned that considerable judgement is required in practice to distinguish a joint operation from a joint venture.

EFRAG notes that acquisitions of interests in joint operations might often involve (i) contributions of assets, businesses or (parts of) subsidiaries, (ii) loss of control over those, and/or (iii) increasing the joint operator interest in the joint operation.

    EFRAG believes that both of the following should be addressed to avoid uncertainty:

    • The accounting for the loss of control over a business that is contributed to a joint operation, in exchange for an interest in that joint operation.
    • The acquisition of an additional interest in the same joint operation.

    Comments on the letter are invited by 20 March 2013. Click for access to the draft comment letter on ED/2012/7 (link to EFRAG website).

    IASB ED/2013/1

    This Exposure Draft, issued by the IASB on 18 January 2013, proposes to narrow the application of the requirement to disclose the recoverable amount of an asset, and clarify the disclosures when an asset has been impaired.

    In its draft comment letter, EFRAG agrees with the proposal because it "removes burdensome disclosures without reducing the relevance and understandability of the financial information".

    Comments on the letter are invited by 11 March 2013. Click for access to the draft comment letter on ED/2013/1 (link to EFRAG website).

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