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IFRS implementation issues

Date recorded:

The purpose of this session was to discuss the following:

  • IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures—Long-term interests - Due process steps: Agenda paper 12A
  • Property, Plant and Equipment: Proceeds before Intended Use - Due process steps: Agenda paper 12B

IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures — Long-term interests — Due process steps — Agenda Paper 12A

Background

At its October 2016 meeting, Board tentatively decided to include the proposed amendments to IAS 28 in the Exposure Draft Annual Improvements to IFRS Standards 2015–2017 Cycle (the ‘ED’). The proposed amendments clarify that an entity applies IFRS 9, in addition to IAS 28, to long-term interests in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture, but to which the equity method is not applied (see AP 12B to the October 2016 meeting).

The purpose of this session was to seek the Board’s permission to prepare the ED for balloting. Expected timetable:

  • Balloting of the ED - November 2016;
  • Publication of the ED - December 2016 / January 2017.

Staff recommendation

The Staff recommended that the Board grant permission to ballot the ED, with a proposed comment period of not less than 90 days.

Discussion

The Board approved the Staff’s recommendation.

One Board member reiterated his disagreement with the proposed amendment as he believed that the Board had not yet resolved the perceived double-counting issue in the proposed amendment. He believed that respondents to the ED would likely raise this issue in their comment letters. Furthermore, he was of the opinion that if IFRS 9 worked well, then IAS 28 was redundant (and should enjoy a happy retirement) since it was invented many years ago when financial instruments accounting standards were not well developed.

Property, Plant and Equipment: Proceeds before Intended Use — Due process steps — Agenda Paper 12B

Background

At its meeting in October 2016, the Board tentatively decided to propose a narrow scope amendment to IAS 16 to prohibit deducting the proceeds from selling items produced while making an item of PPE available for use from the cost of that PPE (see AP 12C to that meeting).

The purpose of this session was to seek the Board’s permission to prepare the ED for balloting.

Staff recommendation

The Staff recommends that the Board grant permission to ballot the ED, with a proposed comment period of not less than 120 days.

Discussion

The Board approved the Staff’s recommendation.

One Board member disagreed with the proposed amendments as he believed that it blurred the distinction between revenue and costs relating to the (i) production stage and (ii) pre-production stage. Furthermore, he believed that it was inappropriate to recognise revenue from selling items produced while making an item of PPE available for use without recognising the associated costs (depreciation). He believed that this would allow for more structuring opportunities.

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