Annual Improvements Project 2008

Date recorded:

The Board discussed potential improvements to the annual improvements process itself and two amendments to IAS 38 Intangible Assets for inclusion in the 2008 annual improvements.


Scope and process for future 'Improvements to IFRSs'

The staff presented a paper suggesting changes to scope and due process for future improvements to IFRSs. The proposals were based on general comments received on the exposure draft for Improvements to IFRSs published in October 2007.

Scope of the project

The staff was of the view that it would not be possible to define a universally agreed scope for the improvement project. In particular, the staff noted that the term 'minor amendment' was subjectively interpreted, for example, in terms of word count or accounting effect. Therefore, the staff proposed that the scope of the project should be determined on the basis of what amendments are appropriate to be included in a single annual exposure draft rather than on the definition of the word 'minor'.

When deciding whether the nature of the amendment allows inclusion in a single annual exposure draft or requires individual exposure the staff suggested using the factors included in the Due Process Handbook for the IASB, including pervasiveness of issue, diversity of practice, increasing convergence, feasibility of a sound solution, and cost/benefit considerations. The staff emphasised that such a decision requires judgement.

The Board agreed to the staff proposal.

The Board also agreed to a staff analysis that the use of a single annual exposure draft is appropriate, that is, that no additional due process documents are required.

Due process

Regarding the process for future improvements to IFRSs the Board made the following decisions:

  • The IASB's website summary should be amended by including a revised explanation of the project scope and, in particular, eliminating the word "minor".
  • Balloting should take place individually for each issue throughout the year. Immediately after approval by the Board, the text of the post-ballot draft (including basis for conclusion, consequential amendments to other IFRSs and dissenting opinions) is posted to the IASB's website.
  • At the end of the project cycle all previously balloted issues are collated in the exposure draft. The exposure draft should have a 90 day comment period. In this context the staff noted that constituents will not be precluded from providing feedback on individual proposed amendments at any time after the post-ballot draft is available on the website.
  • To segregate in the ED amendments that result in accounting changes (Part I) and those that are terminology or editorial changes (Part II), similar to the segregation in the near-final draft of the 2007 annual improvements.
  • To continue considering early adoption and transitional provisions on a standard by standard basis.

For the 2008 annual improvements the Board agreed to the following estimated timetable:

  • June 2008: Last Board meeting to discuss/approve new proposals; sweep issues, if any, to be discussed in July
  • August 2008: Publication of exposure draft with comment letter due date in November 2008 (90 days comment period)
  • January to March 2009: Board redeliberations of comments received
  • 1 April 2009: Publication of final amendments
  • 1 January 2010: Effective Date (unless otherwise indicated)


IAS 38 - Measuring the fair value of an asset acquired in a business combination

The Board discussed a proposed amendment to paragraphs 40 and 41 of IAS 38, which provide guidance regarding valuation techniques to measure the fair value of an intangible asset acquired in a business combination when there is no active market for the asset.

The general concern raised by constituents was that the guidance in paragraph 41 of IAS 38 does not describe commonly-used valuation techniques in the manner in which they are used in practice. In particular:

  • It is uncommon in practice to use valuation multiples to measure the fair value of intangible assets
  • The relief from royalty approach is mischaracterised since this approach reflects the hypothetical amount the entity saves by not having to license it from another party whereas paragraph 41(a) focuses on the amount received from licensing the asset to another party.
  • IAS 38 could be interpreted as prohibiting the use of a cost approach, in particular, the approach of 'current replacement cost' which is considered to be a commonly used valuation technique.
  • The word 'or' between paragraphs 41(a) and 41(b) may be misinterpreted in a way that (a) and (b) are mutually exclusive.

For timing reasons the Board decided to address this issue in the 2008 annual improvement project and not in the fair value measurement project.

The Board agreed to the proposed amendment (omitted from observer notes) subject to drafting suggestions.


IAS 38 - Additional consequential amendments arising from IFRS 3 (revised 2008)

The staff suggested making additional consequential amendments to paragraphs 36 and 37 of IAS 38 to clarify that:

  • an intangible asset must be recognised separately from goodwill even if it is separable only together with a related contract, identifiable asset, or liability.
  • if an intangible asset is separable only together with another intangible asset, those assets can be recognised together as a single asset.
  • if the individual assets in a group of complementary intangible assets have similar useful lives, those assets can be recognised together as a single asset.

The Board agreed to the proposed amendment (omitted from observer notes) subject to drafting suggestions.

The Board decided to propose an effective date of 1 July 2009 to align it with the effective date of the revised IFRS 3. The Board agreed to a staff analysis that the short implementation period of three months would be acceptable since (1) the amendments simply clarify the Board's decisions in the business combinations project and (2) the proposed final wording would be available on the IASB's website before the exposure draft is published.

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