We comment on the IASB's proposed amendments to IFRS 1
01 Mar 2008
Deloitte has submitted comments on the IASB's revised Exposure Draft of proposed amendments to IFRS 1 on Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate.
- Entities, in their separate financial statements, would be allowed to use a 'deemed cost' option for determining the cost of an investment.
- That 'deemed cost' could be either fair value (determined in accordance with IAS 39) or the carrying amount under previous national standards.
- The 'deemed cost' option to would apply to jointly controlled entities and associates as well as subsidiaries.
- A new parent would be required to measure cost using the carrying amounts of the existing entity at the date when the new parent is formed.
We agree with the proposals relating to the use of deemed cost within IFRS 1. In particular, we agree with the proposal to permit the use of the previous GAAP carrying amount as deemed cost. We also support the proposals to amend IAS 27 by deleting the definition of the cost method. However, we are concerned that the requirement for mandatory impairment testing when a dividend has been received from a subsidiary, associate or jointly controlled entity in the period will impose an onerous burden on many entities in circumstances where it is clear that no impairment exists. As explained further in our response to question 4 in Appendix A, we suggest that receipt of a dividend, in certain circumstances, should be an indicator of impairment, rather than imposing a mandatory requirement for impairment testing whenever a dividend is received. |