The Board discussed several proposed amendments relating to the revisions to IFRS 3 and IAS 27.

The Board considered the following proposed amendments to the revised IFRS 3 and IAS 27:

1. the transition requirement to apply retrospectively some of the consequential amendments to other standards
2. the transition requirements for losses attributable to the non-controlling interest that have previously been allocated to the controlling interest
3. the transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised standard
4. the treatment of pre-existing contingent consideration of the acquiree
5. the IFRIC recommendation to amend the standard to include the indicators that identify the existence of a customer relationship in the implementation the Board tentatively agreed to in December 2008
6. the allocation of other comprehensive income in a transaction with the on-controlling interest that does not result in loss of control
7. the interaction of the effective date of IFRS 3 with the requirements in IFRS 1
8. the application of IFRS 5 in a step acquisition and in loss of significant influence over an associate or a jointly controlled entity

The Board also considered FASB deliberations on the scope of SFAS 160 Noncontrolling Interests in Consolidated Financial Statements, as well as a list of other issues.

The transition requirement to apply retrospectively some of the consequential amendments to other standards

The first issue the Board considered was whether the consequential amendments from phase II of the business combinations project be applied prospectively or retrospectively?

One Board member said that they thought that it was obvious. IFRS 3 is prospective. Others agreed. One other Board member was not sure it was so clear. Following some discussion, the Board agreed that the consequential amendments should be applied prospectively. The majority of the Board thought, however, that this was already clear from the existing guidance in the standards, and voted not to make any amendments as part of the Annual Improvements Process.

The transition requirements for losses attributable to the non-controlling interest that have previously been allocated to the controlling interest

The second issue the Board considered was how an entity should account for losses in excess of the NCI in the subsidiary's equity that were previously absorbed by the owners of the parent (a) at the day of transition and (b) when the subsidiary reports subsequently profits.

The Board considered two questions:

• Question 1: At the day of transition should an entity reallocate losses attributable to NCI that were previously allocated against the equity of the owners of the parent to NCI?
• Question 2: If reallocation is not required, how should the subsidiary allocate future profits? Should it be allocated to the owners of the parent until the previously absorbed losses have been reversed? Or should an entity allocate future profits on the basis of the present ownership interests of the owners of the parent and NCI, ignoring the losses that have been previously absorbed by the owners of the parent?

The staff outlined three alternatives to address those questions:

• Alternative 1: Upon transition, the entity does not reallocate previously absorbed losses from equity of the owners of the parent to NCI. In addition, future profits are allocated in proportion to the respective interests of the owners of the parent and NCI; thus ignoring the losses that have been previously absorbed by the owners of the parent.
• Alternative 2: Upon transition, the entity does not reallocate previously absorbed losses from equity of the owners of the parent to NCI. However, future profits will be allocated first to the owners of the parent until the previously absorbed losses are reversed. Subsequently profits are attributed to the owners of the parent and NCI.
• Alternative 3: Upon transition, the entity reallocates previously absorbed losses from the equity of the owners of the parent to NCI without restating prior years' comparatives. If the Board adopts this alternative, it is not necessary to provide further guidance on the subsequent accounting.

The staff views were divided between Alternative 1 (view 1) and Alternative 3 (view 2).

The Board were asked if they would like to add the issue to the annual improvements project. The Board voted to not add this issue to the annual improvements project. They noted that the original intention of the Board when developing the standard was Alternative 1.

The transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised standard

The next issue the Board considered was whether transitional guidance should be added to IAS 39 to exempt pre-adoption contingent consideration from the scope of IAS 39. The Board agreed with the staff recommendation to add the issue to the annual improvements project. The proposal would amend the effective date paragraph for the consequential amendment to IAS 39 to clarify that IAS 39 does not apply to pre-adoption contingent consideration.

The treatment of pre-existing contingent consideration of the acquiree

The next issue the Board considered was how to account for pre-existing contingent consideration. Specifically, the IASB were asked to clarify the treatment of contingent consideration of the acquiree that an acquirer assumes in a business combination. The staff were of two views in considering this question. Some staff believe that pre-existing contingent consideration retains its nature as contingent consideration in a subsequent business combination (view 1) and other staff believe that pre-existing contingent consideration does not meet the definition of contingent consideration in IFRS 3 and cannot be analogised as such (view 2). The Board were asked if they agreed that they issue should be added to the annual improvements project (they did), and whether they supported view 1 or 2. There was significant confusion amongst the Board members as to what view 1 and 2 were trying to convey. For example, Board members queried whether view 1 meant you would be accounting for the contingent consideration under the old IFRS 3 or the new. The staff clarified that they thought it would be the new. Following discussion, the staff were requested by the (acitng) Chair to reconsider the views and clarify the paper, including some example. The staff were also requested to come back to the Board with a recommendation as part of the revised paper.

The IFRIC recommendation to amend the standard to include the indicators that identify the existence of a customer relationship in the implementation the Board tentatively agreed to in December 2008

At its December 2008 meeting, the Board tentatively concurred with the IFRIC's recommendations to consider proposed amendments to IFRS 3 Business Combinations that clarify the guidance on non-contractual customer relationships acquired in a business combination. The Board also directed the staff to liaise with the FASB to prepare additional analysis for a future meeting.

The first recommendation the staff presented to the Board was to remove the distinction between the treatments of 'contractual' and 'non-contractual' customer-related intangible assets in a business combination and focus on the nature of the relationship rather than how it is established. The Board agreed that this issue should be addressed as part of the post-implementation review of the revised standard.

The staff then proposed to review the indicators that identify the existence of a customer relationship in paragraph IE28 of illustrative examples of IFRS 3 and include them in the standard. The board did not support this change and voted against the staff recommendation to move the indicators.

The third staff recommendation was to amend IFRS 3 to delete a depositor relationship example from the section that illustrates 'separate intangibles'. The staff indicated that this request was made to eliminate confusion. One Board member asked the staff why it was confusing? The staff responded by noting that the example implies that depositors were non-contractual as we only consider separable if something is non-contractual. Other Board members did not think that the example was confusing. In response to a vote 5 Board members were in favour of removing the example and 5 were against, so the Chair indicated that the example should stay as is.

The allocation of other comprehensive income in a transaction with the on-controlling interest that does not result in loss of control

The Board then considered whether IAS 27 should include additional requirements to specify the accounting treatment of OCI when a change in ownership interest in a subsidiary occurs that does not result in the loss of control. The Board thought that this was already clear from the standard and therefore disagreed with the staff recommendation to provide additional explicit requirements in IAS 27.

The interaction of the effective date of IFRS 3 with the requirements in IFRS 1

The Board then considered whether the IASB should remove the date limitation on early application of IFRS 3 and IAS 27 to be consistent with the requirements in IFRS 1. A number of Board members noted that they did not see what there was to clarify. If you apply a standard on first time adoption you apply it for all years. The Board unanimously agreed not to amend the standard.

The application of IFRS 5 in a step acquisition and in loss of significant influence over an associate or a jointly controlled entity

The Board then considered two issues relating to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations:

• Issue 1: Should an entity classify as held for sale an associate or a jointly controlled entity in accordance with IFRS 5 when it is highly probable that the entity will lose significant influence or joint control (step-down)?
• Issue 2: Should an entity classify as held for sale an associate or a jointly controlled entity in accordance with IFRS 5 when it is highly probable that control will be obtained (step-up)?

The staff noted that in Improvements to IFRSs issued in May 2008, the Board amended IFRS 5 to clarify that an entity that is committed to a sale plan involving loss of control of a subsidiary shall classify all the assets and liabilities of that subsidiary as held for sale when the criteria set out in paragraphs 6-8 of IFRS 5 are met, regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale. The IASB has been asked to clarify the applicability of IFRS 5 to an associate or jointly controlled entity when it is highly probable that control will be obtained and/or significant influence or joint control will be lost.

In relation to Issue 1 the board agreed that this issue should be addressed in the annual improvements project. A new paragraph should be included in IFRS to clarify that the entity classifies as held for sale an associate or a jointly controlled entity when it is highly probable that significant influence or joint control will be lost.

In relation to Issue 2 one Board member noted that it was not the intention in IFRS 5 to classify things not for sale as held for sale. The Board agreed that IFRS 5 did not apply to such transactions and agreed to add discussion on the issue to the basis for conclusions.

FASB deliberations on the scope of SFAS 160 Noncontrolling Interests in Consolidated Financial Statements, as well as a list of other issues

The final issue considered by the Board was whether to amend the scope of the requirements in IAS 27 that deal (a) with transactions with non-controlling interest that do not result in the loss of control and (b) the loss of control of an entity following FASB deliberations on these issues. The staff recommended not to add the issue to the annual improvements project. The Board agreed.

Finally, the Board considered how to progress a list issues relating to IFRS 3 and IAS 27 that were not covered by the 2009 annual improvements project. These issues were not available to observers. These issues will be considered as part of the post implementation review.