IASB May 2009
The Board discussed topics on interim financial reporting and business combinations, for possible inclusion in the exposure draft of annual improvements, for publication in August 2009.
Interim financial reporting
In February 2009, the Board decided tentatively to develop an amendment to IAS 34 Interim Financial Reporting that emphasises the existing disclosure principles in IAS 34. At this meeting, the Board discussed the proposed amendment and decided tentatively to include it in the exposure draft.
Business combinations
The Board considered questions that have arisen relating to IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements and decided tentatively to clarify in the annual improvements project:
- that the consequential amendments made by IAS 27 to IAS 21, IAS 28 and IAS 31 should be applied prospectively. However, there is no need to clarify the consequential amendments made by IFRS 3 because IFRS 3 clearly requires prospective application.
- that the financial instruments standards (IFRS 7, IAS 32 and IAS 39) do not apply to contingent consideration arising from a business combination whose acquisition date preceded the application of the revised IFRS 3.
- that in applying IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, an entity classifies an associate or a jointly controlled entity as held for sale when it is highly probable that the entity will lose joint control or significant influence. However, classification as held for sale is not appropriate when it is highly probable that the entity will derecognise the investment on gaining control, because in that case there is no sale of the investment.
The Board decided tentatively that there is no need to clarify the following points, because the relevant requirements are clear:
- The amended IAS 27 requires that total comprehensive income is attributed to the owners of the parent and to the non-controlling interest (NCI) even if this results in the NCI having a deficit balance. The standard requires prospective application of the amendment. Thus, upon transition, an entity does not reallocate to the NCI previous losses that were attributable to NCI but were attributed to the equity of the owners of the parent. The entity allocates subsequent total comprehensive income on the basis of the present ownership interests of the owners of the parent and the NCI.
- When a change in ownership interest in a subsidiary occurs but does not result in the loss of control, the parent must reattribute other comprehensive income between the owners of the parent and the non-controlling interest.
- Although IFRS 3 permits early application only for periods that begin on or after 30 June 2007, this limitation does not apply to a first-time adopter. Paragraph 7 of IFRS 1 states that a first-time adopter has to use the same accounting policies throughout all periods presented in its first IFRS financial statements.
The Board noted that the FASB is considering whether to amend the scope of SFAS 160 Noncontrolling Interests in Consolidated Financial Statements so that it would apply only to entities that meet the definition of a business. The Board decided not to propose amendments to the scope of IAS 27. However, the Board will monitor the FASB’s progress on that project.
The Board will address the following issues in its projects on financial instruments and joint ventures:
- contingent consideration: designation (categories of financial instruments) and classification (as equity or a liability);
- put options on non-controlling interest (classification as equity or a liability); and
- the interaction between the revised IFRS 3 and IAS 27, and IAS 28 and IAS 31.
The Board deferred the following issues to the post-implementation review of IFRS 3 and IAS 27, to be conducted two years after their effective date:
- The application of the definition of a business in particular situations.
- The application of the definition of non-controlling interest to equity instruments other than shares (for example, share options) and the measurement of those instruments.
- IFRIC recommendations on (a) removing the distinction between ‘contractual’ and ‘non-contractual’ customer-related intangible assets in a business combination and (b) including in the standard the indicators that identify the existence of a customer relationship. The Board decided tentatively to retain the depositor relationship example in paragraph B34(a) of IFRS 3, noting that this is a separable intangible asset.
- The treatment of indemnification assets (as part of the business combination transaction or as a separate transaction).
Location: London UK
Date: 21/05/2009
Observer Notes