This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IFRS Interpretations Committee meeting — 5-6 March 2019

Start date:

End date:

Location: London

IFRS IC meeting (blue)

 

The IFRS Interpretations Committee met on Tuesday 5 and Wednesday 6 March 2019.

Agenda decisions to finalise

The Committee finalised eight tentative Agenda Decisions.

IFRS 11 Joint Arrangements—Sale of output by a joint operator. When the output a joint operator receives in a reporting period is different from the output to which it is entitled, the joint operator recognises revenue that depicts the transfer of output to its customers in each reporting period, i.e. revenue is recognised by applying IFRS 15.

IFRS 11 Joint Arrangements—Liabilities in relation to a joint operator's interest in a joint operation. IFRS 11 requires a joint operator to recognise its liabilities, which will include those for which it has primary responsibility including when an operator is the primary obligor for a lease contract.

IAS 38 Intangible Assets—Customer's right to access the supplier's software hosted on the cloud. In a cloud-computing arrangement for which the customer does not receive a software asset, the customer receives a service and the arrangement does not contain a lease.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. When an entity contracts to buy or sell a non-financial item in the future at a fixed price, it is not appropriate at the time of physical settlement for an entity to (a) reverse the accumulated gain or loss previously recognised in profit or loss on the derivative, and (b) recognise a corresponding adjustment to either revenue (in the case of a sale contract) or inventory (in the case of a purchase contract).

IAS 23 Borrowing Costs—Revenue recognised over time. Borrowing costs would not be capitalised when the borrowings relate to the construction of a residential multi-unit real estate development for which revenue is recognised over time.

IFRS 9 Financial Instruments—Application of the highly probable requirement in a cash flow hedge relationship. In a cash flow hedge, a forecast transaction can be hedged if, and only if, it is highly probable. This requires consideration of the uncertainty over both the timing and magnitude of the forecast transaction. Furthermore, in the fact pattern analysed, forecast energy sales cannot be specified solely as a percentage of sales during a period.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. If a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of expected credit losses.

IFRS 9 Financial Instruments—Presentation of contractual interest. The reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.

Additional statement. The IFRIC Update will include a statement that:

The process for publishing an agenda decision might often result in explanatory material that provides new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this, an entity might determine that it needs to change an accounting policy as a result of an agenda decision. It is expected that an entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to obtain new information or adapt its systems to implement a change).

New issues

The Committee will discussed three new issues. In each case the Committee decided not to develop an Interpretation or amendment but instead publish a tentative Agenda Decision.

IFRS 15 Revenue from Contracts with Customers—Costs to fulfil a contract.  When revenue is recognised over time (in this case from a property sale, using the output method to measure progress) any costs incurred to fulfil the performance obligation are recognised as an expense when they are incurred.

IFRS 16 Leases—subsurface rights. When a contract between a land owner and another party gives the other party the right to place an oil pipeline in a specified underground space for 20 years, with the land owner retaining the right to use the surface area of the land above the pipeline, that contract contains a lease.

IAS 19 Employee Benefits—Effect of a potential discount on plan classification. The existence of a potential discount on the contribution an entity is obliged to make to a post-employment benefit plan, if the ratio of plan assets to plan liabilities exceeds a set level, does not preclude the plan from being a defined contribution plan.

Continuing discussions

Holdings of a cryptocurrency. The Committee decided to publish a tentative Agenda Decision stating that a cryptocurrency does not meet the definitions of cash or a financial asset but does meet the definition of an intangible asset. Accordingly, IAS 38 Intangible Assets applies to holdings of a cryptocurrency, unless the cryptocurrency is held for sale in the ordinary course of business—in which case IAS 2 Inventories applies.

Future discussions

The staff are working on potential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to provide more guidance when a spot exchange rate is not observable.

The staff have also received a request in relation to a foreign currency hedge of a non-financial asset. The staff are in the process of analysing the matter.

     

    Agenda for the meeting

     

    TUESDAY, 5 March 2019

    Morning session (10:45-13:00)

    • Opening remarks, administrative matters, and meeting minutes of the January 2019 meeting
    • New matters:
      • IFRS 15 — Costs to fulfil a contract
    • Agenda decisions to finalise:
      • IAS 23 — Over time transfer of constructed goods
    • Items for continuing consideration:
      • Holdings of cryptocurrencies

    Afternoon session (14:00-17:40)

    • New matters (continued):
      • IFRS 16 — Subsurface rights
      • IAS 19 — Effect of a potential discount on plan classification
    • Agenda decisions to finalise (continued):
      • IAS 38 — Customer’s right to access the supplier’s software hosted on the cloud
      • IFRS 11 — Sale of output by a joint operator
    • Administrative session:
      • Work in progress

    WEDNESDAY, 6 March 2019

    Morning session (9:00-12:15)

    • Agenda decisions to finalise:
      • IFRS 11 — Liabilities in relation to a joint operator’s interest in a joint operation
      • IFRS 9 — Application of the highly probable requirement in a cash flow hedge relationship
      • IFRS 9 — Physical settlement of contracts to buy or sell a non-financial item
      • IFRS 9 — Credit enhancement in the measurement of expected credit losses
      • IFRS 9 — Curing of a credit-impaired financial asset

    Agenda papers for this meeting are available on the IASB's website.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.