IFRIC issues two draft interpretations for comment

  • IFRIC (International Financial Reporting Interpretations Committee) (blue) Image

15 Jan 2004

The International Financial Reporting Interpretations Committee has issued two draft interpretations – IFRIC D3 'Determining Whether an Arrangement Contains a Lease', and IFRIC D4 'Decommissioning, Restoration and Environmental Rehabilitation Funds'.


IFRIC D3 would require arrangements that do not take the legal form of leases, but that have the substance of leases, to be accounted for in accordance with IAS 17 Leases.

The types of arrangements addressed include outsourcing arrangements; contracts to supply network capacity in the telecommunications industry; take-or-pay contracts (in which purchasers must make specified payments regardless of whether they take delivery of the contracted products or services; and service concession arrangements in which a supplier (usually a private entity) provides the use of an item of infrastructure to a purchaser (usually a government).

The draft provides guidance on determining whether an arrangement is, or contains, a lease for the purpose of applying IAS 17, but it does not provide guidance on whether such leases should be classified as finance or operating leases.


IFRIC D4 would provide guidance where entities contribute to funds established to reimburse their decommissioning, restoration, or rehabilitation obligations when the costs are incurred. Such funds may be established by a single contributor to fund its own decommissioning obligations, or by multiple contributors to fund their joint decommissioning obligations.

IFRIC proposes that the contributor determine whether it has control, joint control, or significant influence over the fund by reference to the standards dealing with subsidiaries, joint ventures, associates and special purpose entities. If it does, the contributor should account for its interest in the fund in accordance with those standards. If this does not apply, and the fund does not relieve the contributor of its obligation to pay decommissioning costs, the contributor should recognise a separate asset (for rights to reimbursement from the fund) and liability (to pay decommissioning costs).

Copies may be downloaded from the IASB's Website. Comments are due by 19 March 2004.


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