Overview

Date recorded:

The IFRS Interpretations Committee (Committee) met on 14-15 June 2022.

The Committee discussed two items for initial consideration and the comment letters received on four tentative agenda decisions.

Items for initial consideration

IAS 21 The Effects of Changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyperinflationary Economies—Consolidation of a Non-hyperinflationary Subsidiary by a Hyperinflationary Parent: The Committee received a submission about the accounting applied by a parent, whose functional currency is the currency of a hyperinflationary economy, when it consolidates a subsidiary whose functional currency is the currency of a non-hyperinflationary economy. The submission asked whether, in preparing its consolidated financial statements, the parent applies IAS 29 to restate the current year and comparative amounts presented for its non-hyperinflationary subsidiary in terms of the measuring unit current at the reporting date. The staff concluded that, an entity could reasonably read the applicable requirements in IAS 21 and IAS 29 to either not restate or restate the subsidiary’s results and financial position and recommend they conduct further research and outreach to obtain further information to decide whether to add a standard-setting project to the work plan. The Committee had mixed views about whether restating, not restating or an accounting policy choice was appropriate and suggested to initiate a narrow-scope project for this matter.

IFRS 17 Insurance Contracts and IAS 21 The Effects of Changes in Foreign Exchange Rates—Multi-currency Groups of Insurance Contracts: The Committee received a submission about the application of IFRS 17 and IAS 21 to a group of insurance contracts with foreign currency cash flows. The submission asked (a) whether an entity considers currency exchange rate risk when applying IFRS 17 to identify portfolios of insurance contracts; and (b) how an entity applies IAS 21 in conjunction with IFRS 17 in measuring a multi-currency group of insurance contracts. The staff concluded that currency risk is considered when identifying portfolios of insurance contracts and an entity uses its judgement in developing and applying an accounting policy for measuring a multi-currency group of insurance contracts. The Committee agreed with the technical analysis and decided not to add the matter to its standard-setting agenda but to publish a tentative agenda decision.

Comment letters on tentative agenda decisions

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: In its September 2021 meeting, the Committee discussed a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on the transfer initiation date, rather than the transfer settlement date. The Committee published a tentative agenda decision concluding that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account. Almost all respondents agreed with the Committee's analysis and conclusions in the tentative agenda decision. The Committee decided to finalise the agenda decision and will report the concerns raised to the IASB.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Negative low or new energy vehicle credits: In its November 2021 meeting, the Committee discussed a submission asking whether an entity with negative low emission vehicle credits has a present obligation that meets the definition of a liability in IAS 37. The Committee published a tentative agenda decision concluding that an entity that has generated negative credits has an obligation that meets the definition of a liability in IAS 37. Most respondents agreed (or did not disagree) with the Committee’s conclusions and the tentative agenda decision but commented on various aspects of the analysis. The Committee decided to finalise the agenda decision.

IAS 32 Financial Instruments: Presentation—Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Financial Liabilities or Equity: In its March 2022 meeting, the Committee discussed a submission asking whether a SPAC classifies public shares it issues as financial liabilities or equity instruments applying IAS 32. The Committee published a tentative agenda decision concluding that the matter is too narrow for the Committee to consider in isolation and is better suited to be addressed as part of the IASB’s Financial Instruments with Characteristics of Equity (FICE) project. All respondents agreed with the tentative agenda decision. The Committee decided to finalise the agenda decision.

IFRS 17 Insurance Contracts—Quantity of the Benefits Provided under a Group of Annuity Contracts: In its March 2022 meeting, the Committee discussed a submission about how to identify, applying IFRS 17:B119(a), the quantity of benefits provided under a group of immediate annuity contracts. The Committee published a tentative agenda decision concluding that in determining the quantity of benefits provided in each period an entity applies the constant annual benefit approach. Under that approach, the benefits are determined using the claim amount payable for the period. While some respondents supported the technical analysis and conclusion, many respondents disagreed with aspects of the Committee’s technical analysis and conclusions in the tentative agenda decision. The Committee decided to finalise the agenda decision.

Work in progress: There were no new matters that have not been presented to the Committee.

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