IFRS 2 – Price differences in an initial public offering

Date recorded:

The project manager introduced the paper. In November 2013, the IC  published a tentative agenda decision not to add to its agenda a request to clarify how an entity should account for a price difference between the retail offer price and the institutional offer price (when the retail offer price is lower) for shares issued in an initial public offering (IPO). The purpose of this paper was to: (a) provide an analysis of the comments received on the tentative agenda decision; and (b) set out the wording for the final agenda decision.

The project manager explained that in one comment letter the respondent indicated that the tentative agenda decision, as drafted, would increase the diversity in practice in applying paragraph 13A of IFRS 2 and IFRS 13. The staff decided that the basis for concluding that two different markets existed was not clear in the tentative agenda decision. The staff recommended to: a) reaffirm its conclusion that IAS 32 applied to the fact pattern analysed; b) delete any reference to the application of IFRS 13 to the fact pattern analysed to avoid any confusion; c) refrain from mentioning that the difference (if any) between the retail price and the fair value of a share appears to relate to the existence of different markets; and d) revise the penultimate paragraph in the tentative agenda decision.


Several IC members expressed concern in relation to the wording of the staff proposal, they mentioned that it was not clear why those transactions were not in scope of IFRS 2. There was an extensive debate on this topic. One IC member expressed that he would prefer the prior version. One IC member indicated that this was a jurisdictional issue and was not widespread. Another IC member suggested that paragraph 13A of IFRS 2 should be amended instead to clarify this issue.  

The chairman summarised the discussion and called to a vote on 1) whether the agenda decision was flawed or 2) whether the conclusion was technically correct but the wording is flawed.  IC members agreed that the agenda decision was correct but the wording needed amending. The agenda paper will be re-drafted and discussed at the July meeting.

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