Why are we undertaking the project?
The IFRS Interpretations Committee (the Interpretations 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 in which the activity of the joint operation or the activity of the jointly controlled operations or assets constitutes a business, as defined in IFRS 3.
- In response to this request, the Interpretations Committee recommended to the IASB that new guidance to IFRS 11 should be added in a limited scope project.
What we are doing
The IASB proposes that an entity that acquires an interest in a joint operation that constitutes a business should apply the relevant principles of business combination accounting and related disclosure requirements in IFRS 3 and other Standards. Consequently, such an entity would:
- measure identifiable assets and liabilities at fair value with exceptions;
- recognise 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 instruments are recognised in accordance with IAS 32 Financial Instruments: Presentation and IFRS 9 Financial Instruments;
- recognise deferred tax assets and deferred tax liabilities that arise from the initial recognition of assets and liabilities, except for deferred tax liabilities that arise from the initial recognition of goodwill; and
- recognise the residual as goodwill;
These requirements will also apply to the accounting for the acquisition of an interest in a joint operation on its formation, unless the formation of the joint operation coincides with the formation of a business. The IASB proposes that these requirements apply prospectively to acquisitions of interests in joint operations that constitute businesses on or after the effective date. …