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IAS 18 — Receipt of a dividend of treasury shares

Date recorded:

The IFRIC received a request for guidance on how an investor, in its separate financial statements, should account for dividends received in the form of the investee's treasury shares.

Staff explained that the original request asked for guidance only in the situation where all ordinary shareholders are offered a pro-rata dividend of treasury shares. In analysing the request, the staff added another situation where there is also a cash dividend alternative.

The IFRIC agreed that in the first situation, in accordance with paragraph 29(a) of IAS 18, the investor would not recognise any revenue as the dividend did not change the economic interest of any of the investors – their ownership shares in the investee remained unchanged.

When discussing the second situation, one member was of the opinion that the presence of a cash alternative should not change the substance of the transaction and, therefore, this member does not agree with the staff's conclusion that revenue should be recognised. Another member indicated that if the cash alternative has economic substance, the investor has received some value and should recognise revenue.

The IFRIC had a very long discussion on whether revenue should be recognised in situations where there is a cash alternative and how 'economic substance' should be interpreted. The question on measurement of revenue in such a situation was also raised. The IFRIC could not reach a consensus either on the amount of revenue to be recognised or whether revenue should be recognised at all.

After much deliberation, the Chairman pointed out that the request only dealt with the first situation on which the IFRIC seemed to reach consensus and that any agenda decision should only deal with that. The IFRIC then agreed with the staff's conclusion on the first situation and asked for the draft agenda decision to be amended to only deal with that situation.

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