Agenda decisions to finalise

The staff recommend that the Committee finalise eight tentative agenda decisions.

IFRS 11 Joint Arrangements— Sale of output by a joint operator. When the output a joint operator receives in a reporting period is different from the output to which it is entitled, the joint operator recognises revenue that depicts the transfer of output to its customers in each reporting period, i.e. revenue recognised applying IFRS 15.

IFRS 11 Joint Arrangements—Liabilities in relation to a joint operator's interest in a joint operation. IFRS 11 requires a joint operator to recognise its liabilities, which will include those for which it has primary responsibility.

IAS 38 Intangible Assets—Customer's right to access the supplier's software hosted on the cloud. In a cloud-computing arrangement for which the customer does not receive a software asset, the customer receives a service and the arrangement does not contain a lease.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. When an entity contracts to buy or sell a non-financial item in the future at a fixed price, it is not appropriate at the time of physical settlement for an entity to (a) reverse the accumulated gain or loss previously recognised in profit or loss on the derivative, and (b) recognise a corresponding adjustment to either revenue (in the case of a sale contract) or inventory (in the case of a purchase contract).

IAS 23 Borrowing Costs—Revenue recognised over time. Borrowing costs would not be capitalised when the borrowings relate to the construction of a residential multi-unit real estate development for which revenue is recognised over time.

IFRS 9 Financial Instruments—Application of the highly probable requirement in a cash flow hedge relationship. In a cash flow hedge, a forecast transaction can be hedged if, and only if, it is highly probable, which requires consideration of the uncertainty over both the timing and magnitude of the forecast transaction. Furthermore, in the fact pattern analysed, forecast energy sales cannot be specified solely as a percentage of sales during a period.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. If a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of expected credit losses.

IFRS 9 Financial Instruments—Presentation of contractual interest. The reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.

Additionally, the staff are recommending that IFRIC Update include a statement along the following lines:

The process for publishing an agenda decision might often result in explanatory material that provides new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this, an entity might determine that it needs to change an accounting policy as a result of an agenda decision. It is expected that an entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to obtain new information or adapt its systems to implement a change).

New issues

The Committee will discuss three new issues. In each case the staff are recommending that the Committee not develop an Interpretation or amendment but instead publish a tentative Agenda Decision.

IFRS 15 Revenue from Contracts with Customers—Costs to fulfil a contract.  When revenue is recognised over time (in this case from a property sale, using the output method to measure progress) any costs incurred to fulfil the performance obligation are recognised as an expense when they are incurred.

IFRS 16 Leases—subsurface rights. When a contract between a land owner and another party gives the other party the right to place an oil pipeline in a specified underground space for 20 years, with the land owner retaining the right to use the surface area of the land above the pipeline, that contract contains a lease.

IAS 19 Employee Benefits—Effect of a potential discount on plan classification. The existence of a potential discount on the contribution an entity is obliged to make to a post-employment benefit plan, if the ratio of plan asserts to plan liabilities exceeds a set level, does not preclude the plan from being a defined contribution plan.

Continuing discussions

Holdings of a cryptocurrency. The staff recommend that the Committee publish a tentative Agenda Decision stating that a cryptocurrency does not meet the definitions of cash or a financial asset but does meet the definition of an intangible asset. Accordingly, IAS 38 Intangible Assets applies to holdings of a cryptocurrency, unless it the cryptocurrency is held for sale in the ordinary course of business—in which case IAS 2 Inventories applies.

Future discussions

The staff are working on potential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to provide more guidance when a spot exchange rate is not observable.

The agenda for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte observer notes from the meeting as they become available.