Report from the December 2005 IFRIC meeting

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02 Dec 2005

The International Financial Reporting Interpretations Committee (IFRIC) met at the IASB's offices in London on Wednesday, 1 December 2005. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting.Notes from the IFRIC Meeting1 December 2005 D16 Scope of IFRS 2 – Proposals for final Interpretation At the previous meeting the staff presented a comment analysis of the responses to D16, and the IFRIC decided that the draft should be revised to clarify certain issues.

At this meeting, the staff presented the revised draft, including revisions for the following areas:
  • The scope of the draft Interpretation must be consistent with the scope of IFRS 2, and the types of 'non-reciprocal' arrangements that fall within/outside of the scope of the Interpretation.
  • The draft Interpretation is a clarification of the scope of IFRS 2.
  • The rebuttable presumption in paragraph 13 of IFRS 2 does not apply to unidentifiable goods or services received.
  • Entities would not need to compare the fair value of the equity instrument granted with the fair value of identifiable goods or services received for all non-employee goods or services received.
  • The measurement date for the unidentifiable goods or services received shall be the grant date of the equity instrument. The measurement date for the identifiable consideration will be in accordance with IFRS 2.

IFRIC agreed to include as an example, an illustration of how share-based payment transactions involving close family relationships would be dealt with under the draft Interpretation depending on whether goods or services had been provided to the entity. The words "appears to be less than fair value" were viewed by some as problematic for practical reasons, and the IFRIC agreed to explain the use of those words in the basis for conclusions.

After discussing the above and some drafting issues, none of the IFRIC members indicated an intention to dissent to issuance of the Interpretation.

Interim Reporting and Impairment of Goodwill and of Investments in Equity Instruments

At the previous meeting, the IFRIC tended to the view that the specific guidance with regard to reversals of previously recognised impairment losses of goodwill in IAS 36 and investments in equity instruments in IAS 39 should take precedence over the more general guidance in IAS 34 and decided to proceed with a draft Interpretation.

The staff introduced a draft Interpretation stating an intention to issue it for comment before the end of the year, and to set a 60-day comment period.

The Chairman confirmed that the IASB had been asked about the direction the IFRIC is taking on this project. He indicated that there had been no objections from IASB members.

IFRIC debated whether the draft basis for conclusions should be expanded to discuss, comprehensively, the requirements of IAS 34. The IFRIC was split on this issue, with some favouring a brief basis for conclusions focussing only on the narrow issue dealt with by the draft Interpretation, while others believed it necessary to consider the IAS 34 requirements in more detail in arriving at a conclusion. It was not clear how the IFRIC decided to proceed on this issue.

IFRIC decided to issue a draft Interpretation, with two IFRIC members dissenting. The staff were instructed to finalise the draft and present it to the Board for negative clearance.

Recommendations by the Agenda Committee regarding requests for IFRIC agenda items

The IFRIC decided not to take onto its agenda the following issues. It approved (subject to editorial amendments) rejection wording to be published in the IFRIC Update:

  • Classification of leases of land that do not transfer title.
  • Common control transactions.
  • Scope of IAS 12 Income Taxes.
  • Subscriber acquisition costs in the telecommunications industry.

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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