On The Horizon For IFRS - November 6, 2012 - IFRIC Meeting September 2012

Author:Ms Grant Thornton's Audit Practice Group
Profession:Grant Thornton LLP
 
FREE EXCERPT

INTRODUCTION

All decisions reached at IFRS Interpretations Committee (IFRIC or the Committee) meetings are tentative and may be changed or modified at future meetings. Committee decisions become final only after completion of a formal vote on an Interpretation or Draft Interpretation, which is confirmed by the IASB.

The IFRS Interpretations Committee has issued the September 2012 IFRIC Update, which summarizes the deliberations during the Committee's meeting in London on September 18-19, 2012. Highlights of the meeting are discussed below.

Key IFRIC issues

Current agenda: IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IFRIC 12, Service Concession Arrangements ‒ variable payments for the separate acquisition of property, plant, and equipment and intangible assets: The Committee discussed whether the principles that the IASB is developing in the project on leases should be used as a basis for the accounting for variable payments for the separate purchase of property, plant, and equipment and intangible assets. Because some Committee members were uncertain about applying the proposed leasing principles to these acquisitions, the Committee instructed the staff to develop a paper, on all of the models that it has been considering, for discussion at a future meeting. IAS 19, Employee Benefits ‒ accounting for contribution-based promises ‒ reconsideration of Draft Interpretation D9, Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions: The Committee tentatively decided that employee benefit plans with certain characteristics would fall within the scope of this project, as well as employee post-employment benefit plans (or other employee long-term benefits) if certain conditions exist. The Committee plans to discuss measurement and presentation at a future meeting. Agenda decisions: The Committee decided not to add the following issues to its agenda: IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IAS 17, Leases ‒ purchase of right to use land IAS 19, Employee Benefits ‒ accounting for contribution-based promises ‒ impact of the 2011 amendments to IAS 19 IAS 39, Financial Instruments: Recognition and Measurement ‒ derecognition of financial instruments upon modification IAS 39, Financial Instruments: Recognition and Measurement ‒ classification of a GDP-linked security Tentative agenda decisions: The Committee tentatively decided not to add the following issues to its agenda: IFRS 3, Business Combinations ‒ continuing employment IAS 27, Consolidated and Separate Financial Statements, and IFRS 10, Consolidated Financial Statements ‒ noncash acquisition of noncontrolling interest by a controlling shareholder in the consolidated financial statements IAS 28, Investments in Associates ‒ impairment of investments in associates in separate financial statements IAS 39, Financial Instruments: Recognition and Measurement ‒ income and expenses arising on financial instruments with a negative yield: presentation in the statement of comprehensive income IFRIC work in progress: IFRS 3, Business Combinations, and IFRS 2, Share-based Payment ‒ accounting for reverse acquisitions that do not constitute a business: The Committee tentatively observed that a reverse acquisition transaction in which the accounting acquiree is not a business would be accounted for as a share-based payment transaction in accordance with IFRS 2. The Committee asked the staff to draft a tentative agenda decision that would include the main issues addressed in this discussion for consideration at a future meeting. IAS 19, Employee Benefits ‒ measurement of the net defined benefit obligation for post-employment benefit plans with employee contributions: The Committee discussed whether the guidance on accounting for employee contributions under paragraph 93 of IAS 19 (Revised 2011) needs to be clarified, but reached no definitive conclusions. Instead, the Committee asked the staff to develop specific examples illustrating the accounting for discussion at a future meeting. IAS 40, Investment Property ‒ accounting for a structure that appears to lack the physical characteristics of a building: The Committee discussed whether telecommunication towers in a jurisdiction should be accounted for as property, plant, and equipment under IAS 16, Property, Plant and Equipment, or as investment property under IAS 40, but reached no definitive conclusions. Instead, the Committee asked the staff to analyze this issue further and to consider the feasibility of amending the scope of IAS 40. IAS 41, Agriculture, and IFRS 13, Fair Value Measurement ‒ valuation of biological assets using a residual method: The Committee decided to defer making a tentative agenda decision on this issue since the IASB plans to discuss whether to add a limited-scope project on bearer biological assets under IAS 41 to its technical agenda in September 2012. CURRENT AGENDA

At its September 2012 meeting, the Committee discussed the following items on its current agenda.

IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IFRIC 12, Service Concession Arrangements ‒ variable payments for the separate acquisition of property, plant, and equipment and intangible assets

Background

Previously, the Committee was asked to clarify the accounting for certain payments made by an operator in a service concession arrangement that is within the scope of IFRIC 12, Service Concession Arrangements. Specifically, the submitter asked the Committee to clarify whether such payments should either be

Included in the measurement of an asset and liability at the start of the concession arrangement, or Treated as executory in nature and recognized as expenses as they are incurred over the term of the concession arrangement. The Committee had noted that the issue of variable concession fees is linked to a previous issue discussed in 2011 regarding contingent payments made by an entity for the separate purchase of property, plant, and equipment and intangible assets outside of a business combination.

Current discussion

At the September 2012 meeting, the Committee discussed whether the principles that the IASB is developing in the project on leases should be used as a basis for the accounting for variable payments for the separate purchases of property, plant, and equipment and intangible assets. The Committee also discussed whether amendments to IFRS would be needed to ensure that the accounting for those variable payments is consistent with the principles in the project on leases. However, some Committee members were uncertain about applying the proposed leasing principles because that project is incomplete and the timing of a final leases standard is uncertain. Therefore, the Committee instructed the staff to develop a paper, on all of the following models that it has been considering, for discussion at a future meeting:

The financial liability model based on the principles in IFRS on the accounting for a financial liability The IFRS 3 model based on the accounting for contingent consideration in IFRS 3, Business Combinations The IAS 16 / IAS 37 model based on the principles in IAS 16, Property, Plant and Equipment, IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities The leases model based on the tentative decisions to date in the project on leases The staff was also directed to propose alternative models that focus on the debit side of the transaction instead of the recognition and measurement of the liability and to consider whether the remeasurement of the liability should be treated as an adjustment to the cost of the asset.

IAS 19, Employee Benefits ‒ accounting for contribution-based promises – reconsideration of Draft Interpretation D9, Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions

Background

Several years ago, the Committee proposed IFRIC Draft Interpretation D9, Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions, to address the accounting for...

To continue reading

FREE SIGN UP