Deloitte comment letter on proposals to address the conflict between IFRS 10 and IAS 28 in relation to elimination of profits

  • Deloitte Comment Letter Image

07 Apr, 2013

Deloitte’s IFRS Global Office has submitted a comment letters on the International Accounting Standards Board’s Exposure Draft ED/2012/6 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'. The proposals in ED/2012/6 seek to address the conflict between the requirements IFRS 10 and IAS 28 (2011) in respect of the elimination of profits and we recognise that the exposure draft proposes a pragmatic solution to the conflict. However, we recommend that further guidance be provided on the concept of a 'business' and and recommend that a fuller consideration of the issue be incorporated into the fundamental assessment of the equity method of accounting planned by the IASB.

In relation to the key proposals in ED/2012/6, the comment letter notes the following:

We .. agree that whether the subsidiary or assets sold or contributed constitute a business is a reasonable basis for distinguishing between a ‘downstream’ transaction that should be subject to the requirements of IAS 28(2011) and a disposal that should be subject to the requirements of IFRS 10. However, we note that distinguishing between transactions on this basis (as would also be the case under the proposals of Exposure Draft ED 2012/7 Acquisition of an Interest in a Joint Operation) places additional emphasis on the definition of a business. As such, we support the work of the IFRS Interpretations Committee to produce additional guidance on the application of this concept as part of the IASB’s post-implementation review of IFRS 3.

The full comment letter can be accessed here.

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