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Exposure Draft of proposed amendments to IFRS 2 and IFRIC 11 — Preliminary comment letter analysis

Date recorded:

The IFRIC discussed comments received on the IASB's exposure draft of proposed amendments to IFRS 2 Share-based Payment and IFRIC 11 IFRS 2: Group and Treasury Share Transactions – Group Cash-settled Share-based Payment Transactions (the ED).

The staff noted that this ED was being discussed with the IFRIC because the IASB's ED was triggered by a reference from the IFRIC to the IASB.

The staff noted that respondents expressed general agreement with the proposals regarding scope and measurement for group arrangements between parent and subsidiary but that severe concerns were raised regarding the application of the proposals to arrangements other than those between parent and subsidiary.

Scope and classification

The main concerns raised by constituents were:

  • A contribution in equity from parent should not be recorded for arrangements other than those between parent and subsidiary.
  • There are inconsistencies between the scope of IFRS 2 and IFRIC 11 as proposed and, therefore, the scope and terminology should be aligned among these IFRSs.
  • The ED extends the scope of IFRS 2 on a case-by-case basis. Instead the definitions of 'equity-settled share-based payments' and 'cash-settled share-based payments' in Appendix A of IFRS 2 should be amended.

Alternatively, a more comprehensive project could be undertaken to amend IFRS 2 and in this context the main principles of IFRIC 11 and IFRIC 8 could be incorporated in IFRS 2.

Classification and measurement

The main concerns raised by constituents were:

  • A classification as cash-settled share-based payments in the financial statements of the subsidiary would be inappropriate since the subsidiary has no liability in either of the arrangements described in the ED.
  • The ED has not articulated the IFRS principle for the 'push-down accounting' of the parent's liability in the financial statements of the subsidiary.
  • Remeasurement: The changes in the fair value of the parent's liability should not be recorded in the subsidiary's profit or loss since these changes would be changes in the parent's liability.

The IFRIC had a very preliminary discussion of some of these issues and made suggestions to the staff, but no decisions were requested or made. Project plan/ way forward The IFRIC agreed to participate in assisting the IASB to redeliberate issues in the ED in light of respondents' comments. Specifically, it will address issues related to scope and classification in July 2008 and issues related to measurement at its September 2008 meeting. The IASB will discuss the IFRIC's conclusions at the October 2008 IASB meeting. If no further Board discussion is required, the amendments to IFRS 2 and IFRIC 11 should be issued in December 2008.

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