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Reference to the Conceptual Framework (Amendments to IFRS 3)

Date recorded:

Matters raised by respondents to the Exposure Draft (Agenda Paper 10)

In May 2019, the Board published ED/2019/3 Reference to the Conceptual Framework, which proposed amendments to IFRS 3. The comment period has now closed.

A summary of the proposals can be found here.

Most respondents supported all the proposals they commented on. However, some respondents suggested that updating the reference to the Conceptual Framework could have unintended consequences beyond those addressed by the proposals in the Exposure Draft. Respondents suggested three further amendments.

They suggested the Board:

  • add to IFRS 3 another exception to its recognition principle for current tax liabilities and assets;
  • clarify which aspects of the proposed requirements for contingent liabilities apply the IFRS 3 recognition principle and which aspects are exceptions to that principle; and
  • clarify whether updating the reference to the Conceptual Framework will change IFRS 3 requirements for recognition of assets and liabilities whose fair values are subject to measurement uncertainty.

Staff recommendation

On (a), the staff analysed the concerns raised, but concluded that there are existing conflicts between the requirements of IFRS 3 and those of IFRIC 23 and these will not necessarily be made worse by updating the IFRS 3 reference to the Conceptual Framework. Consequently, there is no reason in this project to make an exception to the IFRS 3 recognition principle for current tax liabilities or assets. The staff recommend that the Board confirms the ED proposal to add to IFRS 3 an exception to its recognition principle only for liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21. The staff recommend the Board does not add an exception for current tax liabilities and assets.

On (b), the staff recommend that the Board confirms the ED proposal to locate all the requirements for initial recognition of provisions, contingent liabilities and contingent assets within the section headed ‘Exception to the recognition principle’, without distinguishing aspects that that are exceptions to the principle from aspects that apply the principle. If the Board agrees with the staff recommendation, the staff can add to the Basis for Conclusions (BC) a paragraph explaining the Board’s decision in a way that clarifies that those requirements include both exceptions to, and applications of, the recognition principle.

On (c), the staff recommend that the Board clarifies in the BC on the amendments that updating the reference to the Conceptual Framework does not change IFRS 3 requirements for recognition of assets and liabilities whose fair values are subject to measurement uncertainty. The explanation could include an observation that BC125 misrepresents the status of the Conceptual Framework.

The Board were asked to vote on these recommendations.

Discussion and voting

On (a), the staff, in response to a few comments raised by two Board members reiterated their belief that no exception should be added for current tax liabilities and assets as this would not increase conflicts between existing standards and interpretations.

All Board members voted in favour of the staff’s recommendation.

On (b), there was no discussion and all Board members voted in favour of the staff’s recommendation.

On (c), the suggestion by a Board member that BC125 be deleted, as it is a stand-alone paragraph that simply creates confusion, was generally supported. One Board member sought reassurance that staff was comfortable that deleting the paragraph would not lead to unforeseen consequences or effects. Staff explained that, despite their original recommendation, research into deletion of the paragraph indicated that there would be no further consequences. Another Board member was concerned that deletion would create a precedent given that this was not the normal process followed.

13:1 Board members voted in favour of deletion of the paragraph (rather than clarification as originally recommended).

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