New Issues

The Committee decided to publish seven new tentative Agenda Decisions. These summaries reflect our understanding from the Committee’s discussions. The tentative decisions will be published in due course.  

IFRS 16 Leases — Incremental borrowing rate —The definition of incremental borrowing rate does not explicitly require a lessee to determine its incremental borrowing rate to reflect the interest rate in a loan with a similar payment profile to the lease payments.

IFRS 16 Leases — Lease term and useful life of leasehold improvement — (a) An  entity considers the economics of a contract when determining the enforceable period of the lease, and not only any contractual termination payment (such as the cost of abandoning or dismantling leasehold improvements). (b) IAS 16 provides sufficient guidance to enable an entity to determine the useful life of non-removable leasehold improvements. The life is not limited to the lease term of the related lease but the lease term must be considered in determining the useful life.

IFRS 9 Financial Instruments — Fair value hedge of foreign currency risk on non-financial assets — Foreign currency risk can be a separately identifiable and reliably measurable risk component of a non-financial asset held for consumption  that an entity can designate as the hedged item in a fair value hedge accounting relationship. 

IAS 7 Statement of Cash Flows — Changes in liabilities arising from financing activities — The requirements in IAS 7 for information about changes in liabilities arising from financing activities required by IAS 7 are clear.

IAS 1 Presentation of Financial Statements — Presentation of an uncertain tax position — A liability related to uncertain tax treatments is a current (or deferred) tax liability and not a provision.

IFRS 15 Revenue from Contracts with Customers — Compensation for delays or cancellations — An an obligation to compensate customers for delayed or cancelled flights (as set out in legislation) is recognised as part of the transaction price and not an obligation in accordance with IAS 37.

IAS 41 Agriculture — Subsequent expenditure — IAS 41 allows an entity to Capitalise or expense the costs related to the biological transformation of biological assets.

Agenda decisions finalised

The Committee finalised four tentative agenda decisions.

IFRS 15 Revenue from Contracts with Customers — Costs to fulfil a contract — When revenue is recognised over time (in this case from a property sale, using the output method to measure progress) any costs incurred to fulfil the performance obligation are recognised as an expense when they are incurred.

IFRS 16 Leases — subsurface rights — When a contract between a land owner and another party gives the other party the right to place an oil pipeline in a specified underground space, with the land owner retaining the right to use the surface area of the land above the pipeline, that contract contains a lease.

IAS 19 Employee Benefits — Effect of a potential discount on plan classification — The existence of a potential discount on the contribution an entity is obliged to make to a post-employment benefit plan, if the ratio of plan asserts to plan liabilities exceeds a set level, does not preclude the plan from being a defined contribution plan.

Holdings of a cryptocurrency — A cryptocurrency does not meet the definitions of cash or a financial asset. It meets the definition of an intangible asset is accounted for in accordance with IAS 38, unless it the cryptocurrency is held for sale in the ordinary course of business—in which case IAS 2 applies.

Continuing discussions

The Committee discussed potential narrow-scope amendments to IAS 21 to define “exchangeability” and a “lack of exchangeability” and specify the requirements that would apply when there a lack of exchangeability in a currency.

Work in progress

The staff have received requests in relation to the definition of a lease and foreign operations in consolidated financial statements. The staff are in the process of analysing those matters.

More information

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.