IFRS Interpretations Committee holds March 2022 meeting

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21 Mar, 2022

The IFRS Interpretations Committee (Committee) met on 15-16 March 2022. The Committee discussed four items for initial consideration and the comment letters received on one tentative agenda decision.

Items for initial consideration

IFRS 17 Insurance Contracts—Quantity of the Benefits Provided under a Group of Annuity Contracts: The Committee received a submission about how to identify, applying IFRS 17:B119(a), the quantity of benefits provided under a group of immediate annuity contracts. The staff concluded that in determining the quantity of benefits provided in each period an entity applies the constant annual benefit approach. Under that approach, the benefits are determined using the claim amount payable for the period. Most of the Committee members agreed with the staff's analysis. The Committee will publish a tentative agenda decision based on the analysis.

IFRS 9 Financial Instruments and IFRS 16 Leases—Rent Concessions: Lessors and Lessees: The Committee received a submission about the application of IFRS 9 and IFRS 16 by both a lessor and a lessee in accounting for a particular rent concession. The staff concluded that the lessor estimates the expected credit losses (ECL) on the operating lease receivable by taking into account its expectations of forgiving lease payments. The lessor also applies both the derecognition requirements in IFRS 9 and lease modification requirements in IFRS 16 for the rent concession granted. The Committee decided to publish a tentative agenda decision to that effect. In addition, for the lessee accounting on the forgiven lease payments, the Committee decided a standard-setting project (annual improvement) given the possible alternative interpretations of the principles and requirements in IFRS 16 is necessary.

IAS 32 Financial Instruments: Presentation—Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Financial Liabilities or Equity: The Committee received a submission asking whether a SPAC classifies public shares it issues as financial liabilities or equity instruments applying IAS 32. The staff concluded that the matter is too narrow for the Committee to consider in isolation and is better suited to be addressed as part of the IASB’s Financial Instruments with Characteristics of Equity (FICE) project. All Committee members agreed with this.

Special Purpose Acquisition Companies (SPAC): Accounting for Warrants at Acquisition: The Committee received a submission about how an entity accounts for warrants on acquiring a SPAC. The staff analysed the accounting treatment step by step and concluded that IFRS 2 is applied in accounting for instruments issued to acquire the stock exchange listing service and IAS 32 is applied in accounting for instruments issued to acquire cash and assume any liabilities related to the SPAC warrants. The Committee decided to publish a tentative agenda decision to that effect, but preferred not adding the analysis of a variation (the reverse acquisition) to the tentative agenda decision.

Comment letters on tentative agenda decision

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: In September 2021, the Committee published a tentative agenda decision on whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents. Most respondents to the tentative agenda decision agreed (or did not disagree) with the technical analysis and conclusions but raised some concerns. The Committee decided to finalise the agenda decision.

Administrative matters

Work in progress: The following new matter has not yet been presented to the Committee: Lease payments linked to cadastral value (IFRS 16).

More In­for­ma­tion

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

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