Agenda decision to finalise

IFRS 10 Consolidated Financial Statements and IFRS 16 Leases—Sale and Leaseback of an Asset in a Single-asset Entity: In September 2020, the Committee discussed the applicability of the sale and leaseback requirements in IFRS 16 to a transaction in which an entity sells its equity interest in a subsidiary that holds only a real estate asset and then leases that real estate asset back. The staff concluded that IFRS 10:25 and B97-B99 apply to the accounting for the loss of control of the subsidiary and IFRS 16:100(a) applies for measuring of the right of use (ROU) asset and the gain on the leaseback arrangement. However, most of respondents from the outreach performed suggested adding a standard-setting project because the requirements in IFRS Standards do not provide an adequate basis to support the analysis and conclusion. The staff, therefore, asked the Committee whether it wants to finalise the tentative agenda decision or whether an amendment to IFRS 10 is required.

New issues

IAS 2 Inventories—Cost necessary to sell inventories: Which costs should an entity include as part of the estimated costs necessary to make the sale when determining the net realisable value of inventories?

The staff recommend publishing a tentative agenda decision stating that an entity includes all costs needed to make the sale, instead of only including additional costs required by the particular conditions of the inventories to make the sale.

IAS 10 Events after the Reporting Period—Preparation of Financial Statements when an Entity is No Longer a Going Concern: Can an entity prepare financial statements for prior periods on a going concern basis if it was a going concern in those periods and had not previously prepared financial statements for those periods? And if it had previously prepared financial statements for the preceding period on a going concern basis, is it required to restate comparative information in respect of the preceding period to reflect the basis of accounting used in preparing the current period's financial statements? IFRS Standards are silent on both matters.

The staff recommend not to add the matter to the Committee’s standard-setting agenda as the matter is not widespread and there is no evidence of diversity in practice.

Work in progress: The staff are analysing requests related to the accounting of warrants that are initially classified as liabilities and non-refundable value-added tax on lease payments.

The full agenda for the meeting and our com­pre­hen­sive pre-meet­ing summaries can be found here.