Review of Tentative Agenda Decisions published in May IFRIC Update

Date recorded:

IFRS 3 Business Combinations – Acquisition-related costs in a business combination

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IFRS 3 Business Combinations – Earlier application of revised IFRS 3

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IAS 7 Statement of Cash Flows – Determination of cash equivalents

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IAS 27 Consolidated and Separate Financial Statements – Transaction costs for non-controlling interests

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IAS 28 Investments in Associates – Potential effect of IFRS 3 (as revised in 2008) and IAS 27 (as amended in 2008) on equity method accounting

Staff introduced the paper based on the tentative agenda decision and comment letters received and indicated that information on step acquisitions included in the draft tentative agenda decision was not included in the original submission received from constituents. One member expressed concern with including a response in the agenda decision that was not part of the original request for clarification and proposed that the final agenda decision should be based on the original submission and the IFRIC's draft response as agreed at its May meeting.

The IFRIC then discussed whether analogy to IFRS 3 with regards to accounting for contingent consideration is appropriate in as far as associate accounting is concerned. Some members pointed out the IFRIC has previously agreed that analogy is not appropriate and don't believe the IFRIC should change its position now. One member is of the opinion that there is no real problem as other IFRSs dealing with assets accounted for at cost, require any contingencies to be included in the cost of the asset. Another member requested having a separate debate on this issue at the September meeting. The Chairman mentioned that it is the Board's intention to rethink accounting for associates as a whole and that some consequential amendments will be made to IAS 28 following the finalisation of the revised IAS 31, which is anticipated in September.

The IFRIC agreed to remove the additional paragraphs added to the wording agreed in May and confirm the tentative agenda decision not to add the item to its agenda.

IAS 28 Investments in Associates – Venture capital consolidations and partial use of fair value through profit or loss

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IAS 28 Investments in Associates – Impairment of investments in associates

One member noted that, as the Board had already decided in its June 2009 meeting that it would include this issue within the exposure draft of Improvements to IFRS, no further discussion was needed. The Board had decided that impairment of associates measured at cost in the separate financial statements of the investor should follow IAS 39 requirements.

One member of the IFRIC noted that similar clarification would be needed for treatment of subsidiaries in the separate financial statements. The Chairman noted that this issue can be addressed through either the consolidation or financial instruments project.

The IFRIC decided to include some reference to these developments in its agenda decision. Final wording will be circulated to the IFRIC members for approval.

IAS 39 Financial Instruments: Recognition and Measurement – Hedging using more than one derivative as the hedging instrument

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

IAS 39 Financial Instruments: Recognition and Measurement – Meaning of 'significant or prolonged'

The IFRIC received 10 comment letters regarding its May tentative decision. Two of these comment letters were from the regulators who were particularly concerned with the proposed wording that emphasised uniqueness of each equity investment and the use of judgement. Many IFRIC members expressed their concerns that this could lead to reduction of the amount of information available to users.

The IFRIC had an extended discussion of the issue as well as proposed changes in the agenda decision wording. The IFRIC members noted that the issue relates to the creation of criteria for individual financial instruments that the company has to apply the consistently. Nonetheless, the majority of the members noted that the changes in the wording proposed by staff go beyond the scope of an agenda decision.

Ultimately, the majority of the IFRIC members agreed that the May wording more clearly articulated the position of the IFRIC in most of the areas than the changes proposed by the staff. Nonetheless, the IFRIC agreed to modify the wording of the agenda decision and to include a reference to the existing disclosure requirements of IAS 1 and IFRS 7. After discussion, the IFRIC also decided to include a reference to consistency of the criteria applied. The IFRIC members proposed also minor changes to the structure of the agenda decision. Final wording to be circulated to the IFRIC members for approval.

IFRIC 12 Service Concession Arrangements – Scope of IFRIC 12

The IFRIC confirmed its tentative agenda decision not to add the item to its agenda.

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