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IFRIC: Accounting for Reimbursements

Date recorded:

During the May 2003 meeting, the Board agreed with IFRIC'S overall intention to account for the two forms of rights to reimbursement the same way - fair value through the income statement. The two forms are as follows:

  • contractual rights to receive reimbursement in the form of cash, and
  • rights to reimbursement other than contractual rights to receive cash
This issue has arisen in the project for decommissioning funds in which the IFRIC concluded that changes in the fair value of the liability must go through earnings under IAS 37. As a result, the IFRIC would also like changes in the fair value of the asset to be required to go through earnings. The IFRIC, however, is concerned that rights to receive cash are financial instruments and therefore would be within the scope of IAS 39, which would allow other than fair value through the income statement.

The staff has therefore requested that the IASB amend IAS 39 to scope out contractual rights to receive cash related to decommissioning liabilities and allow the IFRIC to require changes in fair value be recognised through the income statement. The Board agreed by an 11-3 vote. The result is that two exposure drafts will be issued: one amending IAS 39 and one for the IFRIC interpretation. It is expected that the respondents will comment on the two exposure drafts as a package.

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