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Review of tentative agenda decisions published in July IFRIC Update

Date recorded:

The staff asked the IFRIC to confirm the tentative agenda decisions published in the July IFRIC Update in the light of comments received.

IAS 17 — Recognition of lease expense under an operating lease

The IFRIC agreed to keep the original wording of the tentative agenda decision and remove the proposed reference to the right to use the leased asset. The Agenda Decision was confirmed.

IAS 18/IAS 32 — Accounting for trailing commissions

The IFRIC discussed in length the comments received on this tentative agenda decision. There seemed to be agreement around the table that the Agenda Decision as currently drafted did not answer the question asked in the submission. Furthermore, it was agreed that the difficulty of identifying whether future services must be rendered does not only arise from contractual obligations, but also from implicit obligations. Some members acknowledged that the reason IFRIC could not find a consensus on this issue was because the relevant Standards IAS 32 Financial Instruments: Presentation and IAS 18 Revenue have different underlying concepts. IAS 18 incorporated a reliability threshold, something that IAS 32 would not require. The IFRIC reconfirmed the decision not to take the item on the agenda. However, it was agreed that the wording would be amended and circulated, and if IFRIC members cannot agree on the wording, it will be brought back to the next meeting. Also, it will be considered whether re-exposing would be required.

IAS 32 — Transaction costs deducted from equity

The IFRIC discussed this issue in length, especially on the issue whether the agenda decision would 'interpret' the requirements in paragraphs 37 and 38 of IAS 32 Financial Instruments: Presentation too narrowly. It was highlighted that the decision whether transaction costs relate to a equity transaction require judgement in some instances – something that the agenda decision did not include. The Chairman stated that practice interpreted the guidance too widely resulting in too many costs deducted from equity. Finally, it was decided to redraft the Agenda Decision to include judgement.

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