Loss of control — Agenda paper 3

Recap

The IFRS Interpretations Committee has been discussing whether the retained interest in the assets and liabilities of a joint operation should be remeasured when an entity loses control of the asset or group of assets. Some members of the Interpretations Committee expressed a preference for remeasuring the retained interest in transactions in which the asset, or group of assets, constitutes a business. However, the Interpretations Committee noted that there is a conflict between the requirements in IFRS 10 and IFRS 11 with respect to the loss of control transaction which is similar to the conflict that exists between IFRS 10 and IAS 28.  IFRS 11 requires an entity to recognise gains or losses on the sale or contribution of assets to a joint operation only to the extent of the other parties’ interests in the joint operation; while IFRS 10 requires that an entity should remeasure any retained interest when it loses control of a subsidiary. In addition, the Board also decided to address the conflict between IFRS 10 and IAS 28 as part of its research project on equity accounting, and also decided to defer the effective date of the amendments to IFRS 10 and IAS 28. In consideration of those issues, the Interpretations Committee decided to consult the Board to assess whether it should postpone further discussion of the loss of control transaction until the Board further considers the accounting for the sale or contribution of assets to an associate or a joint venture.

The purpose of this session was to provide the Interpretations Committee the feedback obtained from the Board and discuss the staff recommendation.

Analysis of feedback obtained from the Board

The staff discussed this issue with the Board in October 2015 and obtained feedback from three Board members. There was general agreement that at this stage the Interpretation Committee should not consider this issue. It was also pointed out that the issue is not urgent and it would be better waiting how the issue related to sale or contribution of assets to an associate and joint venture evolves.

Staff recommendation

The staff recommended that the Interpretations Committee should not take this issue onto its agenda and also that the Interpretations Committee should ask the Board to consider the loss of control transaction at the same time as it further considers accounting for the sale or contribution of assets to an associate or a joint venture.

The agenda paper includes the wording proposed by the staff for the tentative agenda decision.

Committee discussion and consensus

The Committee agreed with the staff’s recommendation and had no further comments relating to the wording of the tentative agenda decision.