The revised ED was published on 13 December 2007. Under the proposal:
- 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, and support, the majority of the proposals outlined in the exposure draft. However, we express a number of concerns with some of the proposals. Click to
Download the Deloitte Letter (PDF 160k). Here is an excerpt:
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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.
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Our past comment letters are
Here.