First day of the October 2004 IFRIC meeting

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09 Oct 2004

The International Financial Reporting Interpretations Committee (IFRIC) is meeting in London for two days: 7 and 8 October 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the first day of the meeting.Notes from the IFRIC Meeting7 October 2004 IFRIC D1 - Emission Rights The IFRIC discussed the effective date of 1 March 2005 and underscored that its intention was for this Interpretation not to be effective for European first-time adopters although early adoption is encouraged. The point was made that the Basis for Conclusions does not adequately support the decision taken for non-amortisation of the allowances under D1. In addition, concern was raised that the Basis for Conclusions appears to give the impression that application of IAS 38 would result in an accounting treatment that is not representationally faithful.

Staff agreed to revisit the drafting.

Other editorial type issues were discussed.

No objections were noted to the finalisation of this Interpretation, subject to editorial amendments.

IFRIC D7 - Scope of SIC 12 Consolidation - Special Purpose Entities

At this meeting, the staff presented to the IFRIC, an analysis of the 26 comment letters received.

Removal of scope exclusion for equity compensation plans

All respondents agreed with the proposal to remove from SIC-12 the scope exclusion for equity compensation plans.

Post-Employment and Other Long-Term Benefit Plans

Most respondents agreed with the proposed amendment. However, some respondents expressed concerns about how the proposed amendment would affect defined contribution plans. The IFRIC discussed this issue at length and agreed with the Staff proposal that the only change that should be made to the scope of SIC-12 in respect of post-employment benefit plans is to simply add a reference to 'other long-term employee benefit plans', i.e. so as to read:

"This Interpretation does not apply to post-employment benefit plans or other long-term employee benefit plans."

D6 Multi-employer Plans

Due to the overwhelmingly unfavourable responses to D6, staff proposed that IFRIC recommend to the IASB that an amendment to IAS 19 be considered so as to provide a blanket exemption from defined benefit accounting and to require instead, defined contribution accounting with additional disclosures. Respondent's main concern was the availability of information as well as the reliability of the apportionment amongst participants in a multi-employer plan.

The IFRIC discussed this issue at length with certain members indicating that the staff proposal was a step backward from the correct answer. Members reaffirmed the intention of D6 as that of moving the accounting by participants of multi-employer plans towards defined benefit accounting. A blanket exemption would therefore be less satisfactory than the current IAS 19 requirements that IFRIC sort to improve.

IFRIC decided not to proceed with D6 but to bring the issue to the IASB's attention for consideration and guidance.

D3 - Determining Whether an Arrangement Contains a Lease

Editorial type issues were discussed and no objections were noted to the finalisation of D3.

Waste Electrical and Electronic Equipment

Editorial type issues were discussed and no objections were noted. A draft Interpretation will be finalised and forwarded to IASB members for negative clearance.

Report of Agenda Committee and Activities of Other Interpretive Bodies

Staff presented the issues raised to the Agenda Committee as well as other interpretive bodies. These issues were noted.

Application Issues for IAS 1

The IFRIC were asked to consider whether to add to its agenda, the following application issues in respect of IAS 1:

a. whether it is acceptable to present net finance costs on the face of the income statement without showing the finance costs and finance revenue composing it; and

b. whether particular expenses (such as impairments, inventory write-downs and restructuring costs) may be omitted from functional classifications to which they relate and presented on a nature of expense basis.

The IFRIC was in general agreement that in the case of issue (a), netting is not allowed.

After some discussion, the IFRIC decided to not to take issue (b) on the agenda as this could best be dealt with as an amendment to IAS 1. The IFRIC agreed to raise both these issues with the IASB in order to gauge whether the Board could deal with these issues under the Performance Reporting project.

This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

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