We comment on seven IFRS Interpretations Committee tentative agenda decisions

  • Deloitte document (mid gray) Image

20 Aug 2019

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IAS 1, IAS 7, IAS 41, IFRS 9, IFRS 15, and IFRS 16, as published in the June 2019 IFRIC Update.

More information about the issues is set out below:

Issue Agenda decision supported? More information
IAS 1 — Presentation of liabilities or assets related to uncertain tax treatments Yes
IAS 7 — Disclosure of changes in liabilities arising from financing activities Yes
IAS 41 — Subsequent expenditure on biological assets Yes
IFRS 9 — Fair value hedge of foreign currency risk on non-financial assets Yes, we agree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision. However, we have some concerns with the articulation of the agenda decision in the case where an entity is intending to consume the non-financial item.
IFRS 15 — Compensation for delays or cancellations Yes
IFRS 16 — Lease term and useful life of leasehold improvements No, we disagree with the Committee decision not to take the issue of how to determine the lease term of a cancellable lease or a renewable lease onto its standard-setting agenda. This issue highlights a key difficulty that entities and their auditors face in the application of IFRS 16 which is the assessment of whether a contract continues to be enforceable if both parties have termination rights but at least one of the parties would suffer a more than insignificant penalty if they were to exercise their right (i.e., whether economic disincentive to the exercise of a termination right is relevant to the assessment of whether a lease contract continues to be enforceable).
IFRS 16 — Lessee’s incremental borrowing rate No, we do not agree with the Committee’s conclusion that a lessee is not required to determine an incremental borrowing rate that reflects the interest rate in a loan with a similar payment profile to the lease payments. We do not believe that it is appropriate to infer that the reference to “a similar term” should be read as simply meaning over the “lease term” as defined in Appendix A.

Click to access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee. 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.