Issue

In July 2006 the IFRIC published a tentative agenda decision that explained why it had decided not to issue guidance on whether a contract that is indexed to an entity’s own revenue or own earnings before interest, tax, depreciation and amortisation (EDITDA) is (or might contain) a derivative.

The tentative agenda decision addressed two issues:

• whether the exclusion from the definition of a derivative of contracts linked to non-financial variables that are specific to a party to the contract applies only to insurance contracts
• whether EBITDA or revenue is a financial or non-financial variable.

Decision not to add

January 2007

Reason

The tentative agenda decision concluded that:

• the exclusion from the definition of a derivative of contracts linked to non-financial variables that are specific to a party to the contract is not restricted to insurance contracts, on the basis of the current drafting of the standard; and
• although IAS 39 is unclear whether revenue or EBITDA is a financial or non-financial variable, the IFRIC would not take this issue onto its agenda because it was unlikely to reach a consensus on a timely basis.

At the January 2007 meeting, the IFRIC decided to withdraw the tentative agenda decision. Having reconsidered the issue, the IFRIC noted that taking no action would allow continued significant diversity in practice regarding how financial and non-financial variables were determined.

Consequently, the IFRIC directed the staff to refer the issue to the Board. The IFRIC recommended that the Board should amend IAS 39 (possibly as part of the annual improvements process) to limit to insurance contracts the exclusion from the definition of a derivative of contracts linked to non-financial variables that are specific to a party to the contract.

IFRIC reference: IAS 39-8

Issue

The IFRIC received a submission regarding the accounting for short sales of securities when the terms of the short sales require delivery of the securities within the time frame established generally by regulation or convention in the marketplace concerned.

A fixed price commitment between trade date and settlement date of a short sale contract meets the definition of a derivative according to IAS 39 paragraph 9. However, the submission noted that entities that enter into regular way purchase or sales of financial assets are allowed to choose trade date or settlement date accounting in accordance with IAS 39 paragraph 38.

Therefore, the issue was whether short sales of securities should be eligible for the regular way exceptions (ie whether entities that enter into short sales are permitted to choose trade date or settlement date accounting).

Decision not to add

January 2007

Reason

The IFRIC noted that paragraphs AG55 and AG56 of IAS 39 address the recognition and derecognition of financial assets traded under regular way purchases and regular way sales of long positions. If the regular way exceptions are not applicable to short sales of securities, such short sales should be accounted for as derivatives and be measured at fair value with changes in fair value recognised in profit or loss.

The IFRIC received several comment letters explaining an interpretation of IAS 39 that is commonly used in practice. Under that interpretation, entities that enter into short sales of securities are allowed to choose trade date or settlement date accounting. Specifically, practice recognises the short sales as financial liabilities at fair value with changes in fair value recognised in profit or loss. Under the industry practice, the same profit or loss amount is recognised as would have been recognised if short sales of securities were accounted for as derivatives but the securities are presented differently on the balance sheet.

The IFRIC acknowledged that requiring entities to account for the short positions as derivatives may create considerable practical problems for their accounting systems and controls  with little, if any, improvement to the quality of the financial information presented. For these reasons and because there is little diversity in practice, the IFRIC decided not to take the issue onto the agenda.

IFRIC reference: IAS 39-9

Issue

The IFRIC received a submission regarding the classification in the financial statements of the holders of financial instruments puttable at the option of the holders at an amount other than fair value (the puttable instruments).

The submission noted that the issuer’s contractual obligation to deliver cash requires the issuer to recognise financial liabilities in its financial statements in accordance with IAS 32 Financial Instruments: Presentation.

The issues are:

• how the puttable instruments should be accounted for in the financial statements of the holders, in particular, whether the accounting for the instruments in the financial statements of the holders should be symmetrical with that in the financial statements of the issuer
• whether an entity that has control over an entity that has no equity instruments in issue is required to present consolidated financial statements in accordance with IAS 27 Consolidated and Separate Financial Statements as well as to recognise goodwill in accordance with IFRS 3 Business Combinations.

Decision not to add

January 2007

Reason

Regarding the first issue, the IFRIC noted that IAS 32 and IAS 39 do not directly address whether the accounting for financial instruments in the financial statements of the holders should be symmetrical with that in the financial statements of the issuer. However, the IFRIC noted that the issuer of a financial instrument is required to classify it in accordance with IAS 32, whereas the holder is required to classify and account for it in accordance with IAS 39.

The IFRIC noted that IAS 39 requires the holder to identify embedded derivatives of hybrid financial instruments. IAS 39 also requires the holder to account for the embedded derivatives separately if all the conditions in IAS 39 paragraph 11 are met. These requirements apply to the holder regardless of whether any embedded derivatives are accounted for separately in the financial statements of the issuer. In the light of the existing guidance in IAS 39, the IFRIC decided that the first issue should not be taken onto the agenda.

Regarding the second issue, the IFRIC noted that the control of a subsidiary, and the resulting requirement for a parent to present consolidated financial statements in accordance with IAS 27 (including the requirement to recognise goodwill in accordance with IFRS 3) does not necessarily depend on the parent’s owning equity instruments of the subsidiary. The IFRIC, therefore, decided not to take the second issue onto the agenda.

IFRIC reference: IAS 39-10

Issue

During the course of developing its Interpretation on service concession arrangements, the IFRIC tentatively concluded that a transaction that took the form of a sale and leaseback should not be accounted for as such if it incorporated a repurchase agreement. The reason was that the seller/lessee retained control of the asset by virtue of the repurchase agreement. Hence, the criteria for recognising a sale in paragraph 14 of IAS 18 Revenue would not be met.

However, at its meeting in May 2006 the IFRIC noted that this tentative conclusion would apply more widely than to service concession arrangements and that the matter should be the subject of a separate project.

At this meeting, the IFRIC considered whether the conditions for recognition of a sale in paragraph 14 of IAS 18 must be met before a transaction is accounted for as a sale and leaseback transaction under IAS 17. In particular, the IFRIC considered whether transactions that take the form of a sale and leaseback transaction should be accounted for as such when the seller/lessee retains effective control of the leased asset through a repurchase agreement or option.

Decision not to add

March 2007

Reason

The IFRIC noted that IAS 17, rather than IAS 18, provides the more specific guidance with respect to sale and leaseback transactions. Consequently, it is not necessary to apply the requirements of paragraph 14 of IAS 18 to sale and leaseback transactions within the scope of IAS 17.

However, the IFRIC also noted that IAS 17 applies only to transactions that convey a right to use an asset. SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and IFRIC 4 Determining whether an Arrangement contains a Lease provide guidance on when an arrangement conveys a right of use. If, applying the criteria in SIC-27 and IFRIC 4, an entity determines that an arrangement does not convey a right of use, the transaction is outside the scope of IAS 17 and the sale and leaseback accounting in IAS 17 should not be applied.

The IFRIC noted that significantly divergent interpretations do not exist in practice on this issue and that it would not expect such divergent interpretations to emerge. Consequently, the IFRIC decided not to take the issue onto its agenda.

IFRIC reference: IAS 17-6

Issue

The IFRIC was asked to consider whether taxes related to defined benefits, for example taxes payable on contributions to a defined benefit plan or taxes payable on some other measure of the defined benefit, should be treated as part of the defined benefit obligation in accordance with IAS 19 Employee Benefits.

Decision not to add

March 2007

Reason

The IFRIC noted the following:

• Taxes paid by a defined benefit plan are included in the definition in IAS 19 of the return on plan assets
• Income taxes paid by the entity are accounted for in accordance with IAS 12
• The scope of IAS 19 is not restricted to benefits paid to employees. It includes some costs of employee benefits that are not paid to employees
• A wide variety of taxes on pension costs could exist worldwide, each specific to its own jurisdiction, and it is a matter of judgement whether they are income taxes within the scope of IAS 12, costs of employee benefits within the scope of IAS 19, or other costs within the scope of IAS 37.

Given the variety of tax arrangements, the IFRIC believed that guidance beyond the above observations could not be developed in a reasonable period of time. The IFRIC therefore decided not to take the issue onto its agenda.

IFRIC reference: IAS 19-3

Issue

The IFRIC was asked to develop an Interpretation on whether a cash-generating unit (CGU) could combine more than one individual store location. The submitter developed possible considerations including shared infrastructures, marketing and pricing policies, and human resources.

Decision not to add

March 2007

Reason

The IFRIC noted that IAS 36 paragraph 6 (and supporting guidance in paragraph 68) requires identification of CGUs on the basis of independent cash inflows rather than independent net cash flows and so outflows such as shared infrastructure and marketing costs are not considered.

The IFRIC took the view that developing guidance beyond that already given in IAS 36 on whether cash inflows are largely independent would be more in the nature of application guidance and therefore decided not to take this item on to its agenda.

IFRIC reference: IAS36-1

Issue

The IFRIC received a request to interpret what is meant by ‘written option’ within the context of paragraph 7 of IAS 39.

Decision not to add

March 2007

Reason

Under paragraph 7 of IAS 39 a written option to buy or sell a non-financial item that can be net settled (as defined in paragraph 5) cannot be considered to have been entered into for the purpose of meeting the reporting entity’s normal purchase, sale and usage requirements. The application of this paragraph is illustrated in the current guidance.

The submission was primarily concerned with the accounting for energy supply contracts to retail customers.

Analysis of such contracts suggests that in many situations these contracts are not capable of net cash settlement as laid out in paragraphs 5 and 6 of IAS 39. If this is the case, such contracts would not be considered to be within the scope of IAS 39.

In the light of the above, the IFRIC expected little divergence in practice and therefore decided not to take the item on to the agenda.

IFRIC reference: IAS 39-11

Issue

The IFRIC was asked whether, when an entity designates an interest rate swap as a hedging instrument in a cash flow hedge, the entity is allowed to consider only the undiscounted changes in cash flows of the hedging instrument and the hedged item in assessing hedge effectiveness for hedge qualification purposes.

The IFRIC noted that when an interest rate swap is designated as a hedging instrument, a reason for ineffectiveness is the mismatch of the timing of interest payments or receipts of the swap and the hedged item. To take into account the timing of cash flows from interest payments or receipts in assessing hedge effectiveness, entities need also to take into account the time value of money.

Decision not to add

March 2007

Reason

IAS 39 states that ineffectiveness arises when the principal terms of the hedged item do not match perfectly with those of the hedging instrument (see paragraph AG108 of IAS 39).

The IFRIC observed that a consequence of a comparison between changes in undiscounted cash flows of an interest rate swap and changes in undiscounted cash flows of the hedged item for assessing hedge effectiveness is that only a portion of the movements in fair value of the swap is taken into account. The IFRIC noted that such a method for assessing hedge effectiveness would not meet the requirements in IAS 39. IAS 39 paragraph 74 does not allow the bifurcation of the fair value of a derivative hedging instrument for hedge designation purposes, unless the derivative hedging instrument is an option or a forward contract. The only exceptions permitted in IAS 39 paragraph 74 are separating the intrinsic value and time value of an option and separating the interest element and the spot price of a forward contract.

In the light of the above requirements in IFRSs, the IFRIC did not expect significant diversity in practice in the application of those requirements. The IFRIC, therefore, decided not to take the issue onto the agenda.

IFRIC reference: IAS 39-12

Issue

The IFRIC was asked to provide guidance on the accounting for sales of assets held for rental. Some entities sell assets after renting them out to third parties. In such circumstances, it appears that the asset is manufactured or acquired with a dual intention, to rent it out and to sell it. The issue is whether the sale of such an asset should be presented gross (revenue and costs of sales) or net (gain or loss) in the income statement.

Decision not to add

May 2007

Reason

The IFRIC noted that IAS 16 paragraph 68 states that gains arising from derecognition of an item of property, plant and equipment shall not be classified as revenue. Also, when the asset is classified as held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 5 paragraph 24 refers to the derecognition requirements of paragraphs 67-72 of IAS 16, thereby confirming that gains should not be classified as revenue. However, some believed that, in some limited circumstances, reporting gross revenue in the income statement would be consistent with the Framework paragraph 72, with IAS 18 Revenue, IAS 2 Inventories, and IAS 40 Investment Property and with the prohibition on offsets in IAS 1 Presentation of Financial Statements. For this reason, the IFRIC decided to draw the issue to the attention of the Board and not to take the item on to its own agenda.

IFRIC reference: IAS 16-2

Issue

The IFRIC was asked whether plan amendments that reduce benefits should be accounted for as curtailments or as negative past service costs. The submission noted that materially divergent practice could result because of the different recognition requirements for curtailments and negative past service cost.

Decision not to add

May 2007

Reason

The IFRIC noted that the Basis for Conclusions on IAS 19 Employee Benefits indicates that IASC was aware of the ambiguity in distinguishing between negative past service costs and curtailments, but decided that the issue arose too rarely to justify the complexity that a more detailed requirement would produce. However, since the issue was becoming more prevalent and divergent practices were developing, the IFRIC believed that the issue should be addressed.

The IFRIC observed that there would be limited benefit in taking this issue on to its agenda because the Board was currently engaged in a post-employment benefits project. The IFRIC therefore decided not to take the issue on to its agenda, but to refer it to the Board for consideration.

IFRIC reference: IAS 19-4

Issue

The IFRIC was asked to provide guidance on whether, and in what circumstances, a business combination triggers reassessment of the acquiree’s classification or designation of assets, liabilities, equity and relationships acquired in a business combination. Reassessment issues include, for instance, whether embedded derivatives should be separated from the host contract, the continuation or de-designation of hedge relationships and the classification of leases as operating or finance leases.

Decision not to add

May 2007

Reason

At its meeting in February 2007, the Board decided that the issue should be dealt with in Business Combinations phase II.

Given that decision, the IFRIC decided not to take this item on to its agenda.

IFRIC reference: IFRS 3-5

Issue

The IFRIC was asked to provide guidance on whether derivatives that are classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement should be presented as current or non-current in the balance sheet. Such derivatives may be settled more than one year after the balance sheet date.

Decision not to add

May 2007

Reason

IAS 39 sets out requirements on the recognition and measurement of financial instruments. It does not address how financial instruments should be presented in the balance sheet. Consequently, some believed that the held-for-trading classification under IAS 39 is solely for measurement purposes.

IAS 1 paragraphs 51-62 set out requirements for the presentation of an asset or a liability as current or non-current in the balance sheet. IAS 1 paragraph 56 states that information about the liquidity and solvency of an entity is useful for users of the financial statements.

In the light of the above requirements, the IFRIC decided not to take the issue on to its agenda. However, it noted that some believe that IAS 1 paragraph 62 could be read as implying that financial liabilities that are classified as held for trading in accordance with IAS 39 are required to be presented as current. Therefore, the IFRIC directed the staff to recommend to the Board an amendment to IAS 1 paragraph 62 to remove that implication.

IFRIC reference: IAS 1-4

Issue

The IFRIC was asked to provide guidance on applying IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when an entity is committed to a plan to sell the controlling interest in a subsidiary. The request considered situations in which the entity retained a non-controlling interest in its former subsidiary, taking the form of either an investment in an associate, an investment in a joint venture or a financial asset.

The submitter raised four issues relating to the consolidated financial statements of the entity:

• What triggers classification of the subsidiary’s assets and liabilities as held for sale under IFRS 5?
• When classification as held for sale is required, should all the subsidiary’s assets and liabilities be classified as held for sale or only the portion to be sold?
• Is classification as a discontinued operation relevant when the entity plans to retain significant influence over its former subsidiary after the sale?
• After the sale, how should the remaining non-controlling equity investment be measured?

Decision not to add

July 2007

Reason

In considering the first two issues, the IFRIC noted that paragraph 6 of IFRS 5 states: ‘An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use’ [emphasis added]. The IFRIC decided to recommend to the Board that it amend IFRS 5 to clarify whether the criteria for classification as held for sale are met for all of a subsidiary’s assets and liabilities when the parent is committed to a plan that involves loss of control over the subsidiary. The IFRIC believed that IFRS 5 should be amended to clarify that having a plan that meets the conditions in IFRS 5 involving loss of control over a subsidiary should trigger classification as held for sale of all the subsidiary’s assets and liabilities.

On the third issue, the IFRIC noted that a disposal group classified as held for sale will also be a discontinued operation if the criteria of paragraph 32 of IFRS 5 are met. Because the IFRIC did not expect divergence to emerge in practice, it decided not to address the issue. The IFRIC also noted that IFRS/US GAAP differences are likely to arise until a common definition of discontinued operations is adopted with a consistent approach to continuing involvement (as discussed in BC70 of IFRS 5).

The IFRIC noted that the last issue is being considered in the Board’s joint project on business combinations and, therefore, decided not to address that issue.

IFRIC reference: IFRS 5-1

Issue

The IFRIC was asked to provide guidance on whether entities should recognise a deferred tax liability in respect of temporary differences arising because foreign income is not taxable unless remitted to the entity’s home jurisdiction. The foreign income in question did not arise in a foreign subsidiary, associate or joint venture.

The submission referred to paragraph 39 of IAS 12 and noted that, if the foreign income arose in a foreign subsidiary, branch, associate or interest in a joint venture and met the conditions in IAS 12 paragraph 39(a) and (b), no deferred tax liability would be recognised. The submission noted that IAS 12 does not include a definition of a branch. It therefore asked for guidance as to what constituted a branch. Even if the income did not arise in a branch, the submission asked for clarity as to whether the exception in paragraph 39 could be applied to other similar foreign income by analogy.

Decision not to add

July 2007

Reason

The IFRIC noted that the Board was considering the recognition of deferred tax liabilities for temporary differences relating to investments in subsidiaries, branches, associates and joint ventures as part of its Income Taxes project. As part of this project, the Board has tentatively decided to eliminate the notion of ‘branches’ from IAS 12 and to amend the wording for the exception for subsidiaries to restrict its application. The project team has been informed of the issue raised with the IFRIC.

Since the issue is being addressed by a Board project that is expected to be completed in the near future, the IFRIC decided not to add the issue to its agenda.

IFRIC reference: IAS 12-6

Issue

The IFRIC considered a submission relating to the accounting for wagers received by a gaming institution.

Decision not to add

July 2007

Reason

The IFRIC noted the definitions of financial assets and financial liabilities in IAS 32 Financial Instruments: Presentation, and the application guidance in paragraph AG8 of IAS 32. It noted that when a gaming institution takes a position against a customer, the resulting unsettled wager is a financial instrument that is likely to meet the definition of a derivative financial instrument and should be accounted for under IAS 39.

In other situations, a gaming institution does not take positions against customers but instead provides services to manage the organisation of games between two or more gaming parties. The gaming institution earns a commission for such services regardless of the outcome of the wager. The IFRIC noted that such a commission was likely to meet the definition of revenue and would be recognised when the conditions in IAS 18 Revenue were met.

The IFRIC did not consider that there was widespread divergence in practice in this area and therefore decided not to take the issue on to its agenda.

IFRIC reference: IAS 39-13

Issue

The IFRIC was asked to provide guidance on how an entity should apply the requirements of paragraph 76(b) of IAS 39 to demonstrate hedge effectiveness when it designates a single derivative hedging instrument as a hedge of more than one type of risk.

The answer to Question F.1.13 of the Guidance on Implementing IAS 39 requires an entity to assess the hedge effectiveness of each different risk position separately. In order to satisfy this requirement, IG F.1.13 imputed equal and opposite functional currency legs, which did not exist in the contractual terms of the derivative hedging instrument, as a basis to split the fair value of the derivative hedging instrument into multiple components. In addition, IG F.1.12 permits an entity to designate a derivative simultaneously as a hedging instrument in both a cash flow hedge and a fair value hedge. The submission asked whether the approach set out in IG F.1.13 can be extended to other circumstances.

Decision not to add

July 2007

Reason

The IFRIC noted that, although IG F.1.12 and IG F.1.13 allow an entity to impute a notional leg as a means of splitting the fair value of a derivative hedging instrument into multiple components for assessing hedge effectiveness, the split should not result in the recognition of cash flows that do not exist in the contractual terms of a financial instrument (see Question C.1 of the Guidance on Implementing IAS 39).

In addition, the IFRIC noted that IAS 39 requires an entity to document, at the inception of the hedge, how it will assess hedge effectiveness. IAS 39 requires the entity to apply the chosen method consistently over the life of the hedging relationship.

The IFRIC noted that the issue concerned how to assess hedge effectiveness. Therefore, the IFRIC decided not to take the issue on to the agenda because any guidance developed would be more in the nature of application guidance than an interpretation.

IFRIC reference: IAS 39-14

Issue

The IFRIC received a request for an interpretation of how IAS 18 Revenue paragraph 8 should be applied to situations in which an entity employs another entity to meet the requirements of a customer under a sales contract. The request questioned whether there is a need for more general interpretative guidance in this area.

Decision not to add

September 2007

Reason

The IFRIC noted that IAS 18 specifies the accounting for agency relationships. Paragraph 8 states that ‘in an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.’ Paragraphs 6 and 18(d) of the Appendix to IAS 18 refer to the substance of the transaction to identify whether the entity is acting as agent or principal.

The IFRIC acknowledged that no detailed guidance was given in IFRSs on identifying agency relationships. However, the IFRIC believed that:

• determining whether an entity is acting as a principal or as an agent depends on facts and circumstances and that judgement is required
• any guidance beyond that given in IAS 18 would be more in the nature of implementation guidance than an Interpretation.

For these reasons the IFRIC decided not to develop an Interpretation and to remove this item from its agenda. The IFRIC also decided to recommend to the Board that guidance be included in the Appendix to IAS 18 to help constituents to determine whether an entity is acting as a principal or as an agent.

IFRIC reference: IAS 18-2

Issue

IAS 19 Employee Benefits requires entities to attribute the benefit in defined benefit plans to periods of service in accordance with the benefit formula, unless the benefit formula would result in a materially higher level of benefit allocated to future years. In that case, the entity allocates the benefit on a straight-line basis (paragraph 67 of IAS 19).

The IFRIC had previously considered whether entities should take into account expected increases in salary in determining whether a benefit formula expressed in terms of current salary allocates a materially higher level of benefit in later years.

Decision not to add

September 2007

Reason

The IFRIC considered this issue as part of its deliberations leading to Draft IFRIC Interpretation D9 Employee Benefits with a Promised Return on Contributions or Notional Contributions.

However, the IFRIC suspended work on this project until it could see what implications might be drawn from the Board’s deliberations in its project on post-employment benefits. The IFRIC noted that the Board will not address this issue for all defined benefit plans in phase 1 of its project on post-employment benefits. However, the IFRIC noted that it would be difficult to address this issue while the Board had an ongoing project that addressed the issue for some defined benefit plans. The IFRIC decided to remove this issue from its agenda.

IFRIC reference: IAS 19-5

Issue

The IFRIC received requests relating to a situation in which an entity designates an option, in its entirety, as a hedging instrument to hedge a one-sided variability in future cash flows in a cash flow hedge. All changes in the fair value of the option (including changes in the time value component) are considered in assessing and measuring hedge effectiveness.

The requests suggested the following approach to assessing and measuring hedge effectiveness. An entity could compare all changes in the fair value of the purchased option with changes in the fair value of a hypothetical written option that has the same maturity date and notional amount as the hedged item. The requests noted that such an approach would minimise or eliminate hedge ineffectiveness when the terms of the purchased option and the hypothetical written option perfectly matched. The IFRIC was asked whether IAS 39 allows such an approach.

Decision not to add

September 2007

Reason

The IFRIC noted that some respondents to its tentative agenda decision believed that the issue was complex and that there was diversity in practice regarding whether the approach suggested or other similar approaches are allowed under IAS 39.

However, the IFRIC decided not to take the issue on to its agenda because the Board has recently decided to propose an amendment to IAS 39 to clarify what risks and cash flows can be designated as hedged risks and hedged portions of risks for hedge accounting purposes. The IFRIC noted that the Board’s project will specifically address the issue discussed in this agenda decision.

IFRIC reference: IAS 39-15

Issue

The IFRIC received a request to clarify whether the disclosure requirements of other standards, in the absence of specific exclusion, would apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

At the May 2007 IFRIC meeting, the staff presented a paper with two alternative views:

• View A: IFRS 5 and other standards that specifically relate to non-current assets (or disposal groups) classified as held for sale or discontinued operations set out all the disclosures required in respect of those assets or operations. Disclosures required by other standards do not apply to such assets (or disposal groups)
• View B: disclosures required by IFRSs, whose scope does not exclude non-current assets (or disposal groups) classified as held for sale or discontinued operations, continue to apply to such assets (or disposal groups).

Decision not to add

September 2007

Reason

The IFRIC believed that this issue could be resolved efficiently through an amendment to clarify IFRS 5 and decided to draw the issue to the attention of the Board rather than taking the item on to its own agenda. The IFRIC also believed that such an amendment should generally reflect view A, but believed that additional disclosures about such assets (or disposal groups) may be necessary to comply with the general requirements of IAS 1 Presentation of Financial Statements.

IFRIC reference: IFRS 5-2

Issue

The IFRIC received a request to clarify the treatment of employee contributions in accordance with IAS 19 Employee Benefits. The first issue is how employee contributions should be accounted for in general. The second issue is how to account for a pension plan in which the cost of providing the benefits is shared between the employees and the employer.

Decision not to add

November 2007

Reason

On the first issue, the IFRIC noted that paragraph 7 of IAS 19 defines current service cost and that paragraph 120A of IAS 19 implies that contributions by employees to the ongoing cost of the plan reduce the current service cost to the entity. The IFRIC also noted that in accordance with paragraph 91 of IAS 19, employee contributions payable when benefits are paid, such as contributions to a post-employment healthcare plan, are to be taken into account in determining the defined benefit obligation.

On the second issue, the IFRIC noted that paragraph 85 of IAS 19 states that ‘If the formal terms of a plan (or a constructive obligation that goes beyond those terms) require an entity to change benefits in future periods, the measurement of the obligation reflects those changes.’

Therefore, the IFRIC noted that:

• if the terms of a defined benefit plan include surplus-sharing provisions, the employer’s obligation to use any surplus in the plan for the benefit of plan participants (e.g. adjusting participants’ benefits) should be considered when measuring its obligation.
• if the terms of a defined benefit plan include cost-sharing provisions, the requirement for employees to make contributions to reduce or eliminate an existing deficit should be considered when measuring the employer’s obligation.

For these reasons, and because the IFRIC did not expect divergence in practice, the IFRIC decided not to take this item on to the agenda.

IFRIC reference: IAS 19-7

Issue

The IFRIC was asked to provide guidance on accounting for the effects of a change to a defined benefit plan resulting from action by a government.

The IFRIC noted that IAS 19 Employee Benefits already provides guidance on whether the identity of the originator of the change affects the accounting. Paragraph 55 of the basis for conclusions on IAS 19 explains the IASC Board’s decision to reject the proposal that ‘past service cost should not be recognised immediately if the past service cost results from legislative changes (such as a new requirement to equalise retirement ages for men and women) or from decisions by trustees who are not controlled, or influenced, by the entity’s management’. In other words, the IASC did not believe that the source of the change should affect the accounting. Therefore, the accounting for changes caused by government should be the same as for changes made by an employer.

Decision not to add

November 2007

Reason

The IFRIC acknowledged that, in some circumstances, it might be difficult to determine whether the change affects either actuarial assumptions or benefits payable and noted that judgement is required. The IFRIC also noted that any guidance beyond that given in IAS 19 would be more in the nature of application guidance than an Interpretation. For this reason, the IFRIC decided not to add this item to the agenda.

IFRIC reference: IAS 19-6