Work plan for Interpretations (IFRICs)

• Stripping Costs in the Production Phase of a Surface Mine
• IFRIC 13
• IFRIC 14 / IAS 19
• IFRIC 15
• IFRIC 16
• IFRIC 17
• IFRIC 18
• IFRIC 19
• Archive IFRS Interpretations Committee meetings

Committee outstanding issues update

The Committee received a report on two new issues for consideration at a future meeting and on six outstanding issues for consideration at a future meeting. With the exception of those issues, all requests received and considered by the staff were discussed at this meeting. 

Meeting Audio: Agenda Paper 13 (March 2012)Observer note: Agenda Paper 13A (March 2012)

IFRS Interpretations Committee’s activity in 2011

The Committee received an overview of the IFRS Interpretations Committee’s activity from January 2008 to December 2011. This was provided to the Committee for information purposes only. No decisions were made in this regard.

Observer note: Agenda Paper 13B (March 2012)

IFRS 11 Joint Arrangements—acquisition of interest in a joint operation

The Interpretations Committee received a request to clarify the application of IFRS 3 Business Combinations by:

• joint operators for the acquisition of interests in joint operations as defined in IFRS 11; and
• venturers for the acquisition of interests in jointly controlled operations or assets as specified in IAS 31 Interests in Joint Ventures.

in circumstances where the activity of the joint operation or the activity of the jointly controlled operations or assets constitutes a business, as defined in IFRS 3.

At the January 2012 meeting the Committee decided to recommend to the Board that the Committee should develop guidance on behalf of the Board for the accounting for the acquisition of an interest in a joint operation in circumstances in which the activity of the joint operation constitutes a business as defined in IFRS 3.

At this meeting, the Committee agreed that such guidance should make general reference to the relevant principles of business combination accounting and related disclosure requirements in IFRS 3 and other IFRSs and include minimal application guidance. The Committee also decided to propose that issues on which the Committee noted diversity in practice should be specifically identified in the proposed amendment, ie:

• measuring identifiable assets and liabilities at fair value with few exceptions;
• recognising acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity securities are recognised in accordance with IAS 32 Financial Instruments: Presentation and IFRS 9 Financial Instruments;
• recognising deferred tax assets and deferred tax liabilities arising from the initial recognition of assets and liabilities except for deferred tax liabilities arising from the initial recognition of goodwill; and
• recognising the residual as goodwill.

The Committee also discussed whether the proposed guidance should be applied by the joint operator on the formation of a joint operation. However, the Committee did not reach a consensus on this issue and decided that the recommendation to the Board would not address this because it was not the question that was submitted to the Committee.

The staff will present the Committee’s recommendation at a future Board meeting and at that meeting the staff will ask the Board whether the Board agrees with the Committee’s proposed amendment which provides guidance for the acquisition of an interest in a joint operation in circumstances in which the activity of the joint operation constitutes a business as defined in IFRS 3.

IAS 28 Investments in Associates and Joint Ventures—Application of the equity method

The Interpretations Committee received a request to:

a. correct an inconsistency between the requirements of paragraphs 2 and 11 of IAS 28 and IAS 1 Presentation of Financial Statements (revised 2007) regarding the description and application of the equity method. This inconsistency arose when IAS 1 made a consequential amendment to paragraph 11 of IAS 28 as part of the 2007 revision to IAS 1; and

b. clarify the accounting for the investor’s share of the other changes in the investee’s net assets that are not the investor’s share of the investee’s profit or loss or other comprehensive income, or that are not distributions received. For example, clarify how to recognise the changes in net assets of an associate that result from the associate entering into a transaction with its subsidiary’s non-controlling shareholders.

This issue was first discussed by the Committee in the March 2011 meeting and then again in the May 2011 meeting. At the May 2011 meeting, the Committee decided to recommend that this issue should be considered by the Board as part of a broader project to address IAS 28.

At the September 2011 Board meeting, the Board agreed with the Committee’s recommendation that this issue could not be resolved through Annual Improvements. However, the Board asked if the Committee would further analyse the issue and recommend how the Board might address the issue in the short term.

At this meeting, the Committee agreed to reconsider this issue as a result of the Board’s request. The Committee directed the staff to prepare an analysis to consider several fact patterns that illustrate the issue. The Committee asked the staff to attempt to develop a principle that might be useful to the Board in considering whether and how to amend IAS 28. The results of the staff analysis will be discussed by the Committee at a future meeting.

Observer note: Agenda Paper 9 (November 2011)

Meeting Audio: Agenda Paper 9 (November 2011)

IAS 33 Earnings per Share—Calculating earnings per share considering non-cumulative preference dividends

The Interpretations Committee received a request to address an issue related to the calculation of basic earnings per share (‘EPS’) under IAS 33. Specifically, the submitter requested that the Committee should clarify the period in which a dividend on non-cumulative preference shares, which are classified as equity (‘preference dividend’), should result in an adjustment to the EPS calculation. The request explained that the word ‘declared in respect of the period’ in paragraph 14(a) of IAS 33 is not clear as to when the dividends should be taken into account in order to calculate EPS.

The Committee noted that, for non-cumulative preference shares with participation features and classified as equity instruments as described in the fact pattern of the submission, it is not relevant whether the dividends declared on the preference shares have been recognised in the financial statements for the for purposes of calculating EPS. The Committee noted that paragraph A14 of IAS 33 would require the preference dividends in the fact pattern provided to be taken into account in the calculation of EPS, on the notional basis that all of the net profit or loss for the period was distributed to each class of equity instrument.

However, the Committee noted that there may be other fact patterns, for example when no participation feature exists or when there is a loss recorded for the period but a preference dividend is nevertheless declared, that may result in diversity in practice if the wording in paragraph 14(a) is unclear. The Committee therefore directed the staff to:

• perform outreach to determine if any current fact patterns exist where the guidance in paragraph 14(a) applies; and
• to perform an analysis of whether the wording in IAS 33 may need to be clarified.

Observer note: Agenda Paper 14 (November 2011)

Meeting Audio: Agenda Paper 14 (November 2011)

IFRS 11 Joint Arrangements—Acquisition of interest in a joint operation

The Committee received a request to clarify the application of IFRS 3 Business Combinations by:

• joint operators for the acquisition of interests in joint operations as defined in IFRS 11; and
• venturers for the acquisition of interests in jointly controlled operations or assets as specified in IAS 31 Interests in Joint Ventures

in circumstances where the activity of the joint operation or the activity of the jointly controlled operations or assets constitutes a business, as defined in IFRS.

The Committee noted that IFRS 11 will supersede IAS 31 from 2013 and therefore the focus of its discussion was with respect to IFRS 11. The Committee observed that uncertainty exists in accounting for the acquisition of an interest in a joint operation in circumstances where the activity of the joint operation constitutes a business as defined in IFRS 3, because of a lack of explicit guidance. As a result of the lack of explicit guidance, the Committee was concerned that diversity in practice will arise on the application of IFRS 11.

The Committee noted that the most appropriate approach to account for such transactions is to apply the relevant principles in IFRS 3, including measuring identifiable assets and liabilities at fair value with few exceptions and recognising the residual as goodwill. The Committee directed the staff to analyse and recommend whether such guidance should be in the form of an IFRIC Interpretation, an amendment to IFRS 3 or an amendment to IFRS 11. The staff will bring this analysis and a consequent recommendation to a future meeting.

Observer note: Agenda Paper 8 - 8B (November 2011)

Meeting Audio: Agenda Paper 8 to 8B (November 2011)

IFRIC 15 Agreements for the Construction of Real Estate—Meaning of continuous transfer of control in real estate transactions

The Interpretations Committee was asked to clarify the meaning of ‘continuous transfer’ referred to in IFRIC 15. The submission described the sale of multi-unit residential apartments off plan. This request has been discussed twice by the Committee. At the most recent discussions in May 2011, the Committee decided to defer further discussions on this matter until the criteria for the continuous transfer of goods and services are finalised as part of the revenue recognition project.

In June 2011 the Board decided to re-expose the revenue recognition proposals. This decision extended the timescale for the finalisation of that project. In addition, in July 2011 the Committee received a comment letter requesting further clarification of IFRIC 15. This request concerned protective rights and the effect of the entity’s entitlement to consideration from the customer, as articulated in the revenue recognition proposals, on the notion of continuous transfer in IFRIC 15.

As a result of the Board’s decision to re-expose the revenue recognition proposals and of the receipt of the second request for clarification, this topic was discussed by the Committee at this meeting.

The staff provided the Committee with two examples of real estate transactions in two jurisdictions, A and B (refer to agenda paper 5A for the details).

The Committee agreed that the facts are substantially different in jurisdictions A and B. However, although the Committee generally thought that continuous transfer was more likely to occur in the circumstances typical of jurisdiction A than it would in jurisdiction B, it thinks that there is a lack of clarity as to how to identify the key factors that are required to make that determination.

The Committee agreed to liaise with the staff to identify which characteristics would be persuasive in determining continuous transfer in an arrangement for the construction of real estate. After the staff receive this input, the issue will be referred to the Board for direction. The results of this process will be reported to the Committee in a future meeting.

The Committee also discussed a request for clarification of the unit of account in determining continuous transfer in the sale of residential apartments. The Committee agreed that the unit of account in such cases is the residential unit that is the subject of the individual sales agreement. The Committee noted that the unit of account is significant in the assessment of continuous transfer because the unit of account defines the asset being transferred.

Observer note: Agenda Paper 5A-5B (November 2011)

Meeting Audio: Agenda Pape 5A to 5B (November 2011)

IAS 12 Income Taxes—Corporate wrapper

The Interpretations Committee received a request for clarification of the calculation of deferred tax in circumstances in which an entity holds a subsidiary that has a single asset within it. Specifically, the question asked was whether the tax base described in paragraph 11 of IAS 12 and that used to calculate the deferred tax should be the tax base of the (single) asset within the entity that holds it, or the tax base of the shares of the entity holding the asset. The submission explained that the question arises because it is common that the asset will be realised by selling the shares of the entity that holds the asset, rather than selling the asset on its own.

The Committee noted that paragraphs 15 and 24 of IAS 12 require that deferred taxes are recognised for all temporary differences associated with an asset except when certain conditions are satisfied. The Committee also noted that paragraph 39 of IAS 12 requires that deferred tax are recognised for all temporary differences that are associated with investments in a subsidiary that holds the underlying asset unless certain conditions are satisfied. The Committee also noted that paragraphs 7 and 38 of IAS 12 require that the tax bases used to calculate those temporary differences are to be those that relate to both the underlying asset and the investment in the shares of the entity that holds the underlying asset. As a result, the Committee noted that entities have to recognise deferred tax for temporary differences relating to underlying assets even if the entity does not expect to dispose of the asset separately from the entity that holds it. The only exception to the recognition of deferred tax would be in the circumstances in which the initial recognition exceptions in paragraphs 15 or 24 of IAS 12 apply. However, the Committee observed that there is diversity in practice with respect to the recognition of the deferred tax for temporary differences relating to the underlying asset.

Consequently, the Committee withdrew the tentative agenda decision that it had reached in the September meeting and directed the staff to do further analysis on this issue, with the aim of assessing whether the issue could be clarified through an annual improvement. The staff will present further analysis at a future meeting.

Observer note: Agenda Paper 4B (November 2011)

Meeting Audio: Agenda Paper 4B (November 2011)

IFRIC 12 Service Concession Arrangements—Payments made by an operator in a service concession arrangement

The Interpretations Committee received a request to address an issue related to payments made by an operator in a service concession arrangement within the scope of IFRIC 12. Specifically, the submitter requested that the Committee should clarify in what circumstances (if any) certain contractual costs to be incurred by the operator under the service concession arrangement should:

a. be recognised at the start of the concession as an asset with an obligation to make the related payments; or

b. be treated as executory in nature, to be recognised over the term of the concession arrangement.

The Committee noted that when the payments are linked to the right of use of a tangible asset, judgement should be used to determine whether the operator obtains control of the right of use of the asset, because this would determine whether the arrangement is within the scope of IFRIC 12 or of IAS 17 Leases. For example, the Committee noted that when the right of use of a tangible asset is at the direction of the grantor, the operator does not control the right of use and the arrangement is therefore within the scope of IFRIC 12.

The Committee noted that if payments made by the operator to the grantor are within the scope of IFRIC 12, further analysis would need to be performed before the Committee could make a decision on how to proceed with the issue. The Committee therefore asked the staff to:

• analyse the arrangements and focus on whether the arrangements represented the acquisition of an asset;
• analyse what the accounting would be if the operator could cancel the arrangement without penalty;
• consider, if an asset is recognised, whether the asset could be classified as a financial asset based on the principle in IFRIC 12 regarding the financial asset model; and
• consider, if an asset is recognised, what amount the asset should initially be measured at and how any subsequent measurement would interact with IAS 39 Financial Instruments: Recognition and Measurement if the requirement to make payments was a financial liability, both in relation to fixed and variable payments.

Observer note: Agenda Paper 10 (November 2011)

Meeting Audio: Agenda Paper 10 (November 2011)

IFRS 3 Business Combinations—definition of a business

The Interpretations Committee received a request seeking clarification on whether an asset with relatively simple associated processes meets the definition of a business in accordance with IFRS 3. More specifically, the question was whether the acquisition of a single investment property, with lease agreements with multiple tenants over varying periods and associated processes, such as cleaning, maintenance and administrative services such as rent collection, constitutes a business as defined in IFRS 3.

The Committee observed that IFRS 3 and IAS 40 are not mutually exclusive. An entity acquiring an investment property should consider whether it meets the definition of a business as defined in Appendix A of IFRS 3. The Committee noted that the guidance in paragraphs 11 14 of IAS 40 on ancillary services is intended to delineate an investment property from owner occupied property, and not to delineate a business combination from the acquisition of a single asset. Investment property acquired in a business combination is recognised on the acquisition date at fair value in accordance with IFRS 3. An investment property acquired outside a business combination is recognised at cost in accordance with IAS 40.

To avoid confusion on the interrelation of IFRS 3 and IAS 40, the Committee directed the staff to analyse whether a clarification can be made to IAS 40 through the annual improvements process.

The Committee also observed that the difficulty in determining whether an acquisition meets the definition of a business in Appendix A of IFRS 3 is not limited to the acquisition of investment property. The Committee noted that this broader issue goes beyond the scope of its activities and should be addressed by the Board as part of its post-implementation review on IFRS 3.
However, the Committee considered it to be useful for the Board’s post-implementation review if it contributes to that review its experience and the results from the discussions on this issue. Consequently, the Committee directed the staff to continue their discussions with the staff of the US accounting standard setter, the Financial Accounting Standards Board, and to continue their outreach to interested parties from other industry sectors with the aim of providing the Board with relevant information for its post-implementation review.

The staff will present the results of this further work at a future meeting.

Observer note: Agenda Paper 4 (September 2011)

Meeting Audio: Agenda Paper 4 (September 2011)

IFRS 11 Joint Arrangements—acquisition of interest in a joint operation

The Committee received a request to clarify the application of IFRS 3 by:

• joint operators for the acquisition of interests in joint operations as defined in IFRS 11; and
• venturers for the acquisition of interests in jointly controlled operations or assets as specified in IAS 31 Interests in Joint Ventures

in circumstances where the activity of the joint operation or the activity of the jointly controlled operations or assets constitutes a business, as defined in IFRS 3 and it is therefore concerned that there will be diversity in practice under IFRS 11.

The Committee observed that uncertainty exists in accounting for the acquisition of an interest in a joint operation in circumstances where the activity of the joint operation constitutes a business as defined in IFRS 3.

The Committee discussed, but did not arrive at a conclusion on, a view that IFRS 3 is not required to be applied to the particular assets and liabilities of a joint operation in circumstances where the joint operator acquires an interest in a joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. This is because IFRS 3 applies to business combinations and in the acquisition of an interest in a joint operation the acquirer does not obtain control of the business.

In order to avoid significant diversity in practice after the adoption of IFRS 11 and to address the concerns raised in the submission, the Committee directed the staff to analyse whether a premium paid for synergies can be recognised as a separate asset under another standard, eg IAS 38 Intangible Assets in circumstances when an entity acquires an interest in a joint operation that contains a business, or whether IFRS 3 could be applied by analogy, and whether further guidance should be developed on this issue.

The Committee also noted that the Board did not change the wording of the scope exclusion in paragraph 2(a) of IFRS 3 for ‘the formation of a joint venture’ when it decided to replace IAS 31 by IFRS 11, although the Committee understands that the Board did not want to change the scope of IFRS 3. Consequently, the Committee observes that paragraph 2(a) of IFRS 3 should have been amended to say ‘the formation of a joint arrangement’ because IFRS 11 redefined and renamed the different types of joint arrangements. Under IFRS 11 a ‘joint venture’ is one specific type of joint arrangement whereas under IAS 31 it included every type of joint arrangement. The Committee directed the staff to consider whether this issue can be addressed through the annual improvements process.

The staff will present the analysis and a draft annual improvement at a future meeting.

Observer note: Agenda Paper 5 (September 2011)

Meeting Audio: Agenda Paper 5 (September 2011)

IAS 7 Statement of Cash Flows—classification of business combination cash flows

The Interpretations Committee received a request for guidance on the classification of cash payments for deferred and contingent considerations under IAS 7 Statement of Cash Flows.

More specifically, the submitter asked the Committee to clarify whether: (i) the settlement of contingent consideration should be classified as an operating, an investing or a financing activity in the statement of cash flows; and (ii) whether the subsequent settlement of a deferred consideration for a business combination should be classified as an investing or a financing activity in the statement of cash flows.

The Committee noted that the issues are widespread and that divergence in practice exists. Consequently, the Committee directed the staff to do further analysis on these issues with the aim of assessing whether the issues could be solved through the annual improvements process. The staff will present further analysis at a future meeting.

Observer note: Agenda Paper 9 (September 2011)

Meeting Audio: Agenda Paper 9 (September 2011)

IFRS 1 First-time Adoption of IFRSs—prospective application provisions for first-time adopters

The Interpretations Committee was informed about a request that had been received by the IASB to amend IFRS 1 to allow first-time adopters of IFRSs the same prospective application provisions in certain IFRSs as has been afforded to existing preparers of IFRS financial statements. The request notes that while some of the recent Annual Improvements to IFRSs required or permitted prospective application for existing IFRS preparers, no corresponding amendments were made to IFRS 1 for the benefit of first-time adopters. The staff had identified one particular amendment to IAS 20 Accounting for government grants and disclosure of government assistance that they thought required amendment to IFRS 1.

The staff described their plans to propose to the Board that an amendment should be made to IFRS 1 to allow first time adopters to apply paragraph 10A of IAS 20 prospectively, as was permitted for existing IFRS preparers. The staff plan to request that the Board should make the amendment separately, rather than including it in the annual improvements project, in order to progress the issue quickly enough to permit entities adopting IFRS in 2011 to take advantage of the amendment. The staff noted that the amendment would be in the form of an optional exemption, such that other entities that have already transitioned to IFRS in 2011 and produced quarterly reports would not be required to amend their annual financial statements.

The Committee discussed the staff proposals and agreed with the proposal to recommend that the Board amend IFRS 1.

Observer note: Agenda Paper 6 (September 2011)

Meeting Audio: Agenda Paper 6 (September 2011)

IFRS 8 Operating Segments—aggregation of operating segments and identification of the chief operating decision maker

At the July 2011 meeting, the Committee discussed an issue regarding the application of the aggregation criteria and the identification of the chief operating decision maker (CODM). At that meeting, the Committee decided not to propose amendments to IFRS 8 in respect of the issues raised but to recommend to the IASB that it should consider the issues in its post implementation review of IFRS 8 (further information can be found in the July 2011 edition of IFRIC Update).

At the September 2011 meeting, the Committee discussed a comment letter received from the submitter on its previous decision. That letter encouraged the Committee to address both issues as part of the annual improvements project, before a post-implementation review of IFRS 8 takes place.

The Committee noted that the following aspects in IFRS 8 could be the subject of future clarification:

(a) the meaning of ‘similar economic characteristics’ in paragraph 12
(b) the criteria for identifying similar segments in subparagraphs 12 (a–e); and
(c) whether the definition of the CODM included in paragraph 7 should explicitly exclude non executives from the CODM group.

The staff will update the Board with the results of the Committee’s discussion at its meeting in September 2011.

Observer note: Agenda Paper 11 (September 2011)

Meeting Audio: Agenda Paper 11 (September 2011)

IFRS 3 Business Combinations —definition of a business

The Committee received a request seeking clarification on whether an asset with relatively simple associated processes meets the definition of a business in accordance with IFRS 3. More specifically, the question was whether the acquisition of a single investment property, with lease agreements with multiple tenants over varying periods and associated processes, such as cleaning, maintenance and administrative services such as rent collection, constitutes a business as defined in IFRS 3.

The Committee reviewed views received from outreach with the National Standard-Setters group and noted that the issue is widespread, that it has practical relevance and that there is significant divergence in practice.

The Committee noted that the issue raises the question of whether there is any interaction between IAS 40 Investment Property and IFRS 3. It discussed services that are “ancillary services” (as discussed in paragraphs 11-14 of IAS 40) that are not so significant as to disqualify a property from being an investment property but could nonetheless be considered “processes” (as discussed in paragraphs B7-B12 of IFRS 3) that could result in the acquired set of activities constituting a business.

The Committee directed the staff to perform further analysis on the interaction of IAS 40 and IFRS 3 and the characteristics of a business when investment property is acquired.

The Committee asked the staff to consider the following questions:

(a) Are IFRS 3 and IAS 40 mutually exclusive? (Ie can the acquisition of an investment property be a business combination?)

(b) Would it be possible to develop guidance on how to determine if and when an obligation incurred in order to provide services in association with the acquisition of an asset would lead to a business combination?

The staff will present the results of this further work at the meeting in September 2011.

Observer note: Agenda Paper 8 (July 2011)

Meeting audio: Agenda Paper 8 (July 2011)

IFRS 11 Joint Arrangements—acquisition of interest in a joint operation

The Committee received a request to clarify the application of IFRS 3 by

• joint operators for the acquisition of interests in joint operations as defined in IFRS 11; and 
• venturers for the acquisition of interests in jointly controlled operations or assets as specified in IAS 31 Interests in Joint Ventures,
• in circumstances where the activity of the joint operation or the activity of the jointly controlled operations or assets constitutes a business, as defined in IFRS 3.

The Committee noted that the issue raised the question of what unit of account (the joint arrangement or the interest in the joint arrangement) is to be considered for the application of IFRS 3 and whether the activities and assets related to that unit of account can constitute a business.

More specifically, the question is whether, and how, to recognise goodwill, if present, on the acquisition of an interest in a joint operation as defined in IFRS 11 or jointly controlled operations or assets as specified in IAS 31. The submitted example was that of the acquisition of an undivided interest in an oil or natural gas producing field.
The Committee directed the staff to do further analysis on this issue with the aim of assessing whether the issue could be solved through an annual improvement. The staff will present further analysis at the meeting in September 2011.

Observer note: Agenda Paper 9 (July 2011)

Meeting audio: Agenda Paper 9 (July 2011)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment—use of IFRIC 6 by analogy

The Interpretations Committee received a request to clarify whether, under certain circumstances, IFRIC 6 should be applied by analogy to other levies charged for participation in a market on a specified date to identify the event that gives rise to a liability. The concern raised relates to when a liability should be recognised.
The Committee observed that the levies presented in the submission are all different. Whether and how the consensus in IFRIC 6 would apply to them could vary depending upon the facts of each levy.
The Committee also noted that the issue raises the two following fundamental challenges:

The Committee directed the staff to review the guidance in IAS 37 on the timing of recognition of a liability and to perform further outreach activities to National Standard-Setters to learn about what analysis has already been performed on similar levies that might be helpful to the Committee. The staff will present the results of this further work at the meeting in July 2011.

Observer note: Agenda Paper 15 (May 2011)

Meeting audio: Agenda Paper 15 (May 2011)

IFRIC 15 Agreements for the Construction of Real Estate:—meaning of continuous transfer of control in real estate transactions

The Interpretations Committee received a request asking for clarification on the meaning of ‘continuous transfer’ referred to in IFRIC 15. The submission described the sale of residential apartments off plan and that, in some jurisdictions, relevant public authorities may be involved in addition to the direct parties to the sale and purchase transaction (ie the buyer and the developer). The role of such authorities is usually to protect the buyer if the developer defaults.
At the meeting in March 2011, the Committee asked for further input on this issue from interested parties.
At this meeting, the staff provided the Committee with an update of their outreach activities to the jurisdictions in which real estate sales agreements have the characteristics described in the original submission. The revenue recognition project team also provided the Committee with an update on the criteria from the Board’s latest decisions that are intended to help determine when the transfer of control in a sales transaction takes place and more specifically whether a performance obligation is satisfied continuously.
The Committee was provided with an example of a situation that specifically illustrates the issue in the submission; they did not conclude for this example whether the conditions for continuous transfer would be met either under IFRIC 15 or under the Board’s proposed new Revenue standard.
The Committee decided to defer further discussion on this matter until the criteria for the determination of the transfer of goods and services are finalised as part of the revenue recognition project.

Observer note: Agenda Paper 14 (May 2011)

Meeting audio: Agenda Paper 14 (May 2011)

IFRIC 15 Agreements for the Construction of Real Estate:—meaning of continuous transfer of control in real estate transactions

The Interpretations Committee received a request asking for clarification on the meaning of ‘continuous transfer’ referred to in IFRIC 15. The submission described the sale of residential apartments off plan and that, in some jurisdictions, relevant public authorities may be involved in addition to the direct parties to the sale and purchase transaction (ie the buyer and the developer). The role of such authorities is usually to protect the buyer if the developer defaults.

Whilst care should be taken not to offer too generalised an answer for such transactions, because of the effect of different local laws surrounding such real estate activities, the Committee was informed that diversity of views exists for similar types of fact patterns as to whether there is continuous transfer of control while construction is in progress. The Committee expressed concern about evidence received of formal local interpretations of IFRSs on this matter within some of the jurisdictions concerned.

Several Committee members observed that IFRIC 15 provides a principle for determining when continuous transfer is achieved and they thought that any further guidance that the Committee might give would be in the form of implementation guidance. They also noted that the Board project on revenue recognition is currently developing guidance on the meaning of transfer and continuous transfer, with a view to finalising the new IFRS by 30 June 2011. The Committee recommended that the Board should consider the fact pattern of the submission received in its revenue recognition project.

Before concluding on this issue, the Committee asked for further input on this issue from interested parties. At the next meeting in May, the staff will update the Committee as a result of this further work and of developments on the revenue recognition project.

Observer Note: Agenda Paper 9 (March 2011)

Meeting Audio: Agenda Paper 9 (March 2011)

IFRS 2 Share-based Payment—review of requests received by the Committee

The IASB asked the Interpretations Committee to review requests that it had received in relation to IFRS 2 with a view to helping the staff to develop an agenda proposal that the Board could consider as part of the setting of its agenda. The Committee reviewed the following eight requests that it has received over the last six years:

(a) Employee share loan plans (May 2005)

(b) Share plans with cash alternatives at the discretion of the entity (May 2006)

(c) Grant date and vesting periods (May 2006)

(d) Fair value measurement of post-vesting transfer restrictions (Nov 2006)

(e) Employee benefit trusts in the separate financial statements of the sponsor (Nov 2006)

(f) Incremental fair value to employees as a result of unexpected capital restructurings (Nov 2006)

(g) Transactions in which the manner of settlement is contingent on future events (Jan 2010)

(h) Vesting and non-vesting conditions—classification of a non-compete provision and the accounting for the interaction of multiple vesting conditions (Sept 2010).

For issues (a)–(f), the Committee had previously decided not to take these items onto its agenda because the Committee did not expect significant diversity on these items. The Committee is not aware of any further concerns on these matters or of diversity in practice. Consequently, the Committee does not recommend that the Board should consider these issues in any future agenda proposal for IFRS 2.

The Committee thinks that issues (g)–(h) should be considered in a future agenda proposal for IFRS 2 because of diversity in practice. The Committee also decided to recommend that the Board should include in a future agenda proposal the issue of the classification of share based payment awards settled net of tax withholdings (discussed at the March 2011 meeting).

Observer Note: Agenda Paper 8 (March 2011)

Meeting Audio: Agenda Paper 8 (March 2011)