Deloitte Touche Tohmatsu Limited has responded to the International Accounting Standards Board’s (the IASB’s) Exposure Draft ED/2012/6  Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

We welcome the IASB’s initiative to address the conflict between the requirements of IAS 28 Investments in Associates and Joint Ventures (2011) and SIC-13 that has been incorporated into IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) and 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 Business Combinations.

We recognise that the exposure draft proposes a pragmatic solution to the conflict and recommend that a fuller consideration of the conceptual basis for accounting for sales and contributions of assets between an investor and its associate or joint venture be incorporated into the fundamental assessment of the equity method of accounting planned as part of the IASB’s Technical Work Programme.

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