The amendments to IFRS 11, issued by the International Accounting Standards Board (IASB) in May 2014, clarify the accounting for acquisitions of an interest in a joint operation when the operation constitutes a business.  The guidance amends IFRS 11 so that the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in IFRS 3 ‘Business Combinations’, is required to apply all of the principles on business combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that conflict with the guidance in IFRS 11.  The amendments apply to the acquisition of an interest in an existing joint operation and also to the acquisition of an interest in a joint operation on its formation, unless the formation of the joint operation coincides with the formation of the business.

The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

EFRAG supports the adoption of the amendments to IFRS 11 and recommends its endorsement.  EFRAG’s initial assessment is that the amendments to IFRS 11 meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considers the costs and benefits of implementing the amendments to IFRS 11. EFRAG’s assessment is that the benefits for preparers and users in implementing the amendments to IFRS 11 outweigh the costs.

Comments are requested by 16 July 2014. 

Click for (all links to EFRAG website):

• Press release
• Draft endorsement advice and effects study report