Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates

Date recorded:

Issue

The IFRIC considered addressing the issue of whether exchanges of businesses or other non-monetary assets for an interest in the assets of a subsidiary, joint venture or associate should be recognised in the consolidated financial statements at:

(a) fair value as at the acquisition date, therefore recognising a gain (or loss) on ‘sale’ in the consolidated financial statements; or

(b) the pre-combination carrying amount, therefore reversing the gain (or loss) out of the consolidated financial statements; or

(c) the pre-combination carrying amount to the extent of continued ownership interest in the business or non-monetary asset, therefore recognising a gain only for the minority interest portion in the consolidated financial statements.

 

Decision not to add

August 2002

 

Reason

The IFRIC agreed that this item should not be added to the agenda and that this issue (specifically exchanges of businesses or other non-monetary assets for an interest in a subsidiary) should be dealt with in the Board’s Business Combinations (phase II) project.

At its January 2003 meeting the IASB considered the accounting for business combinations in which consideration in the form of a business or other non-monetary asset is transferred to an entity in exchange for equity instruments issued by that entity, which thereby becomes the first entity’s subsidiary. The Board decided that the business or non-monetary asset transferred by the acquirer should not be viewed as part of the  net assets acquired. This is because the acquirer controls the business or non-monetary asset both before and after the business combination. Therefore, the full amount of any profit or loss arising on the transfer to the acquiree of the business or non-monetary asset should be eliminated in the consolidated financial statements.

The Board is not considering this issue as it relates to exchanges that result in joint venture or associates relationships, because it is outside of the scope of the Business Combinations project.

The IFRIC decided to reconsider this issue after the Business Combinations (phase II) project is complete.

 

IFRIC reference: IFRS 3

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