Determining Whether an Arrangement Contains a Lease (Rights of Use) (D3)

The chairman noted that a quorum was not present and therefore decisions made on this issue could not be officially voted. All members present agreed to issue a final interpretation consistent (nearly word for word) with EITF 01-8. The members clarified that the final interpretation would answer the question of when a lease exists – not how that lease would be classified under IAS 17.

The discussion focussed on the effective date (annual periods beginning on or after 1 January 2006) and transition. The members stated that first-time adopters should adopt the interpretation at the date of transition if the reporting date was for periods beginning on or after 1 January 2006. For existing IFRS users (which will include the 2005 adopters in Europe), transactions should be assessed at the effective date and presented in accordance with the new interpretation from the earliest period presented forward.

The IFRIC intends to take a final vote on this issue at the next meeting and expects to issue the interpretation shortly thereafter, for approval by the IASB.

Emission Rights (D1)

A quorum was present for the remainder of the meeting. The IFRIC concluded to issue D1 with minor changes as a final Interpretation. There were no dissenting votes. The staff intends to finalise drafting issues with the members prior to the next meeting and an interpretation is likely to be issued in the early part of the fourth quarter of 2004. No further discussions are planned on this topic.

The IFRIC noted that guidance is needed on this issue now and that if the IFRIC were to wait for the Board to complete several related current projects, guidance was not likely for at least a further year. While there were some reservations about the effects of the conclusions in D1, all members believed the conclusions were consistent with current IFRSs. Therefore, the issuance of such guidance would be better than non-issuance.

As a result, the IFRIC removed its recommendation that IAS 38 be amended to require the intangible assets with attributes of a currency to be presented at fair value with changes in profit or loss.

IAS 37 Provisions: Obligating Event in the Light of the EU Directive on Waste Electrical and Electronic Equipment

The IFRIC continued its discussion of the issue raised by the German standard setters on when a liability should be recognised for the decommissioning of waste electrical equipment (WEE). The IFRIC concluded that the scope should be limited to the accounting for historical waste related to household buyers. Under an EU directive, costs incurred to decommission an asset placed in service prior to 13 August 2005 to household buyers will be borne by the companies selling product in the market at the date the costs are incurred to decommission the asset based on each company's market share. Therefore, the higher the market share at a future point in time, the higher the obligation to decommission.

The IFRIC concluded that the obligating event was the gaining of the market share and therefore no obligation should be recognised prior to that date. Some members expressed a view that the obligating event was the issuance of the legislation (since the equipment to be decommissioned is already in the market) and therefore the issue of market share was a measurement issue. The IFRIC rejected this view.

No further discussions are planned on this topic. The staff will finalise an exposure draft for IFRIC members' review and expect to issue it in the early part of the fourth quarter of 2004.

Decommissioning Funds (D4)

The IFRIC decided to finalise D4 as it was issued with minor changes. There were no dissenting votes. The final interpretation will also clarify that no additional asset should be recorded for rights to excess funds unless the criteria in IAS 37 have been met (virtually certain). The IFRIC may also clarify that when a participant in a fund has the rights to the residual interest in the fund, that residual interest may meet the definition of an equity instrument which should be accounted for in accordance with IAS 39.

No further discussions are planned on this topic. A final interpretation is expected in the early part of the fourth quarter of 2004.

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

Scroll down for notes from 2 September 2004.